Startups Become Shrinking Portion of Oregon Business

Thursday, March 19, 2015

Joanna Evoniuk, GoLocalPDX Contributor

Startups make up a smaller share of all businesses in Oregon, part of a downward trend over the last 20 years, analysis by the Oregon Office of Economic Analysis revealed.

In 2012, new firms made up 7.6 percent of all Oregon businesses, compared to 12.5 percent in 1990. Startup jobs have seen an overall decrease as well, with the share of startup employment dropping three percent during the same time period.

A smaller market share of startups could have consequences in economic activity and the creation of new products in the long run, according to Josh Lehner, economist with the Oregon Office of Economic Analysis.

“The biggest concern is new firms are generally the source of innovation, new products and services, and propel economic activity,” Lehner said. “New firms see an opportunity to fill a void, and the ones that do really well supply a lot of jobs.”

Startups are not only dropping off in Oregon, but around the United States as well. Researchers and economists are still searching for causes of the trend, according to Lehner.

“The tricky part is nobody has been able to find an answer to explain it completely,” Lehner said.

A decrease in work force participation from the prime age of entrepreneurs—30 to 40 year olds—and a reliance on company health care, are some reasons fewer people are taking the leap to start their own company, according to Lehner. Public policy and increases in regulations may affect some activity, but Lehner said because the trend is reflected across the states, a broader answer is needed.

Old and New Firms
Innovation and economic growth may simply be provided through established firms instead of startups, Lehner said.

In the past, when larger firms came up with a new idea, they would spin the product into a new startup firm, according to Tom Potiowsky, director of the northwest economic research center, and professor and chair of economics at Portland State University.

“They'd say, 'lets do it as a startup, and let it grow on its own, unaccompanied by company bureaucracy,'” Potiowsky said.

Now, firms may choose to keep new innovations in house, Potiowsky said.

As long as older firms keep up strong business activity, Lehner said there is no cause for concern.

“What we care about is research, innovation, and new projects—from a practical view we don’t care where it comes from,” Lehner said.

Yet some question how much innovation larger corporations can produce. Joe Maruschak, director of the startup resource RAIN Eugene, said established companies are more focused on making revenue than financing new projects.

“Research is not happing any more, we're not seeing big investments, or the big bets that open up huge opportunities,” Maruschak said.

Fostering Startups
Investing time and resources to help startups succeed can be beneficial for the economy, Potiowsky said, when firms are innovative commercially, and turn into something bigger.

“Google and Amazon weren’t born as businesses with hundreds of employees, Microsoft took more than Bill Gates,” Potiowsky said.

Creating a community of support and experience for startups is one way to help more new companies make the leap to large-scale operations, according to Potiowsky.

Oregon Business, the state’s economic development agency, announced last year they would be focusing their efforts on building up small businesses and startups, rather than brining in existing firms. A $400,000 fund was started last month for small business innovation grants.

To truly see a change, Maruschak said the state needs to commit to attracting and assisting startups, looking beyond a reliance on a resource economy to a knowledge based one.

“Oregon needs to decided it wants to win, and understand it’s a competitive race,” Maruschak said. “At some point it needs to stop choosing to put itself in the box, where there’s limits.”

But public policy and tax breaks can only help a business so much, Lehner said.

“Every state and city has assistance programs out there,” Lehner said. “If there was a simple answer everybody would do it, but we haven’t been able to find an answer.”

Related Slideshow: 10 Takeaways From Portland’s Startup Week

In case you missed it, here are some of the highlights from Portland's Startup Week:

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#1

Women in Tech

The low number of women in the tech industry has become a national issue. At Portland’s Startup Week, events addressed what businesses and women can do about it.

Ingrid Alongi, Co- CEO of Quick Left, gave a presentation outlining ways companies can better include and encourage women in a male-dominated field. Interviewing techniques, team-building exercises, and open feedback channels were some of her seven ways leadership can address the problem.

“I wanted to talk about it on a personal level. It doesn’t take a lot of effort to do these things that are really impactful,” Alongi said.

A separate panel of local tech women professionals discussed ways to get women interested in the industry as well.

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#2

Parties

There may have been serious discussions and topics, but there were plenty of opportunities to cut loose and have fun. Every night, some sort of happy hour or party gave techies and startups the chance to mingle and enjoy food and drink.

PDX Code Guild Founder Sheri Dover said her organization’s party on Monday night was a great opportunity for new talent and experienced advisors to get to know eachother.

“It helps to get everyone together in the same room and build community,” Dover said.

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#3

Attracting Talent

Portland is a booming tech scene, but many tech companies are scrambling to find talented people to fill positions. Participants discussed ways to attract successful talent to the city and state. Founders and tech professionals agreed there are plently open seats to fill in the city.

Brian Henessy, the founder of Thread, said that many young adults move to the state for lifestyle reasons, rather than to make a fortune. Working with staff to meet their needs is one way businesses can draw employees, Henessy said.

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#4

New Generations in Tech

One way to get the needed talent is to create it. Part of Startup Week was to interest young adults or people seeking a change into starting a tech career. Dover said their event and others show people they can start a tech career without a computer science degree.

“In hopes to create more talent, you need to appeal to students and teach skills to help change the tech world,” Dover said.

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#5

Scott Kveton and The Cancled Event

A panel discussion by Ignite Bridgetown was canceled, surrounding a controversy with Scott Kevton.

When CEO of Qcut Crystal Beasley heard that Former Urban Airship CEO Scott Kveton, who stepped down last year after rape accusations, would be a speaker at Ignite Bridgetown, she reached out to organizers.

“It was way too soon for [Kveton] to represent the Portland tech scene,” Beasley said.

After organizers told Beasley the event would still include Kveton, she wrote a post on her blog protesting his involvement and the struggle of women in the tech industry.

Kevton then posted his own statement denying accusations against him, but removing himself from the event,“out of respect for the community.”

Afterwards, Ignite canceled the event, apologizing for any damage they may have caused.

Photo Credit: madame.furie via Compfight cc

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#6

Supporting Startups

Many organizations involved, such as UpGlobal who hosted the week, specialize in building, supporting and mentoring startups. These organizations are dedicated to helping Portland’s startup scene get the help it needs.

However, Hennessy observed there seemed to be more of those organizations involved than actual startups.

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#7

Community Encouragement

Startups who gathered for the week not only got the chance to share about their own companies, but also to learn and hear from others. Henessy said it was encouraging to see common themes at the events and discussions, revealing other startups had similar feelings and experiences.

“It feels good to know you’re not alone,” Henessy said.

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#8

Open Houses

Several startups held open houses during the week, giving people the chance to explore companies in Portland. Krystal South is the program manager of Oregon Story Board.

"Portland Startup Week brought the startup community to multiple locations throughout the city,” South said. “I was able to visit companies and spaces that I wouldn't have seen otherwise. It was great to see startups and entrepreneurs in their natural environments."

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#9

Bigger Than Portland

Although it was Portland Startup Week, companies from across Oregon came to the event. One discussion, “Startup Week Is Every Week, And Not Just In Portland,” featured startup-leaders sharing challenges from operating outside the metro area, and ways to create businesses in rural Oregon.

It also brought visitors from out-of-state.

"I met multiple people who were visiting Portland for Startup Week, who were interested in moving or starting their businesses in Oregon," South said. "Startup Week was a great cross-section of the community events that happen in the city year-round."

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#10

Start of a Culture

This was the first Startup Week for Portland, but attendees feel the event will continue to expand and evolve in years to come. Although the time was productive, Henessy said the event has room to grow.

With the positive energy surrounding the week, Henessy said he would not be surprised to see it acquire the culture and enthusiasm that surrounds Portland’s Design Week.