News

Worst year to start high-tech company? 2000

Five of six Silicon Valley startups from that year failed, U.S. Bureau of Labor Statistics report states

Only one in six high-tech companies that started in 2000 in Silicon Valley remained in business at the end of the decade, according to a report released Tuesday by the U.S. Bureau of Labor Statistics.

The report looked at the era of the dot-com bubble in the early 2000s when "anything with 'dot-com' in its name was a can't-miss investment," said economist Amar Mann, one of the report's co-authors.

More than 25 percent of the startups in Silicon Valley in 2000 were Internet companies, while the average for other years is generally around 10 to 15 percent, Mann said.

Internet companies are often easier to start than other industries since they tend to be small and don't require a lot of investment. However, they were a lot less stable -- of the 7,045 Internet jobs that were created in 2000, only 1,161 were still there in 2009.

2000 was also by far the year with the highest amount of money invested by venture capitalists, who spent nearly $35 million that year,

roughly twice as much as any other year in the past two decades, Mann said.

Mann said the report was simply trying to see what industries survived or sank during the dot-com boom and bust of the 2000s, but it would not likely provide any lessons for those companies.

"Whatever lessons there are for businesses to learn, I think they've already learned it," he said.

Mann said the Silicon Valley business landscape is more diversified now than in 2000, with many industries like wireless applications, online gaming and clean technology that were not even around back then.

Although there are fewer jobs now than in 2000, "wages are way up" and "high-tech continues to be a very important driver of jobs in this area," Mann said.

"Things have certainly changed a lot," he said.

The report considered Silicon Valley to consist of Alameda, Contra Costa, San Francisco, San Mateo, Santa Clara and Santa Cruz counties.

Companies that were acquired by another firm were not included in the study, although Mann said those companies only made up about 1 percent of the total.

Comments

Like this comment
Posted by Barry
a resident of Evergreen Park
on Oct 12, 2011 at 6:16 pm

I believe they meant $35 billion, not $35 million, was invested


Like this comment
Posted by GWB
a resident of Adobe-Meadow
on Oct 12, 2011 at 6:51 pm

What do you expect? 2000 was the start of the Bush presidency. We're still getting over that recession.


Like this comment
Posted by CrunchyCookie
a resident of Greenmeadow
on Oct 12, 2011 at 10:47 pm

CrunchyCookie is a registered user.

President Genius took office in January 2001, so you can't blame the 2000 stock crash, or even the 2001 recession, on him.

Actually, wasn't that mild recession partly our (Silicon Valley's) fault?


Like this comment
Posted by Ha!
a resident of Stanford
on Oct 13, 2011 at 10:45 am

2000 was the year I finished graduate school. I thought of starting a company then and from time to time wonder where I would be today (retired in a beach somewhere? living abroad?) if I had done so. Reading this validates my choices since then to seek a more conservative employment path to guarantee my family's health insurance and income. Start ups sounded way too risky for me then and still do now - it's hard to come across that one great idea that will truly be successful.


Like this comment
Posted by Cecelia Horn
a resident of Another Palo Alto neighborhood
on Oct 13, 2011 at 11:10 am

Whenever I see the Red Community Bus and the "Free Bus" I am confused about how to use them. Both pass very close to where I live (The Moldaw) which everyone calls the JCC because that name is plastered all over the building. The Moldaw Residences is a nonprofit retirement home that open TO ALL RACES AND RELIGIONS AS IT IS PARTIALLY FINANCED BY SPECIAL TREATMENT AS A NONPROFIT. We still have lovely apartment to rent. Come or a tour and see our lovely gym (part of the perks that we enjoy with the JCC. I hope that someone from VTA of the City will publicize the routes and times. Many of us are long-time residents of Palo Alto but now we're below the salt but enjoying all of Palo Alto's amenities. It is just getting harder and harder to use a car. Unfortunately I missed the council meeting on the 12th, so I will have to email Ellen Fletcher who lives here also.


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