by Eric Mathews, founding CEO of LaunchYourCity, Inc.
The headline above probably sounds more like something you would find on top of an Onion article, but the fact is LaunchYourCity and our sister programs in other cities like Chicago, Nashville, Austin, Cleveland, and Chattanooga have already cracked the code on job creation.
While economic development efforts have traditionally focused on relocating manufacturing and warehousing projects to our community, our LaunchYourCity method of focusing on high growth potential startups represents an equally large, if not better, opportunity for our community and our country.
When talking with others I will usually reference 3 key data points:
- New firms zero to five years of age on average add 4 new jobs per year.
- If not for startup businesses, we would have had net job loss in the United States over the last three decades.
- If not for innovation-based high growth potential startups, we would have had net job loss over the last decade.
Recently I came across two new data points that I will be adding to our discussion with local leaders and contributors.
- Every new technology job in a city creates five additional local jobs outside the sector. Two of the five positions on average are in professional work — doctors, lawyers — and the three others in non-professional occupations — waiters, store clerks.
- Technology’s multiplier effect of 5 additional jobs compares with 1.6 jobs for manufacturing.
I don’t fault our community leaders for focusing in on traditional jobs in existing industry. However, we cannot ignore the innovation economy that is growing globally and the need to focus on startup companies.
If we combine the above facts together we find very compelling job creation by startups that cannot be ignored. While a technology startup is adding 4 new positions each year on average, it is also on track to create an additional 20 jobs in the community. That is 24 jobs per year from one technology startup.
The jobs add up fast when you start thinking about many startups launching and then growing each year, year over year. One technology based startup growing over five years creates 120 jobs in our community. If we only successfully launch 10 startups every 5 years that is 1200 jobs. What’s great is we don’t have to just launch 10 new startups every 5 years. We can do it every year and even then we are not limited to 10 a year. If we did 10 a year for 10 years that would be 12,000 jobs.
It is true that technology and innovation cannot offer jobs to the average worker however each job created in these sectors indirectly supports the creation of many more service jobs than a manufacturing plant creates. That’s the magic.
When I wake up each day it is to create a more prosperous economy for the Memphis region that will last beyond my lifetime. I think that innovative startups are the best mechanism to achieve this purpose.
In 2013 I hope that as a community we can paint the economic development picture to be even more inclusive of innovation economy startups. It is the masterpiece our community needs to embrace for a vibrant economic future.
Data Sources: Kauffman Foundation, University of California Economist Enrico Morett