In 1956, William Shockley moved to Mountain View, California, where he founded Shockley Semiconductor Laboratory - one of the earliest computer technology companies. Shockley was unique in his designs in that he believed that silicon was a better material for making transistors - during the time, germanium was the common material. Shockley Semiconductor Laboratory's research led to breakthroughs in silicon transistor technology. In 1957, some of Shockley's employees left the company to form Fairchild Semiconductor. Two of these original employees of Fairchild Semiconductor, Robert Noyce and Gordon Moore, went on to found Intel in 1968. And the rest is as they say, history. Silicon became the base of all transistor technology, and Silicon Valley was born as the leading technology hub in the world.
Today, Silicon Valley is far more than just a place where computers and silicon chips are made. Silicon Valley has become eponymous with American innovation and entrepreneurship. It has led to just about every other major metropolitan area trying to replicate the success of the valley. In more recent decades, the US entrepreneurial ecosystem has grown across the country, peaking in 2006 with 715,734 new startups launched, according to the Bureau of Labor Statistics. Then the Great Recession of 2007-2009 put a dramatic dent in the meteoric rise of the startup ecosystems. Since then, the number of startups launched each year has been back on the rise, nearly reaching the 2006 high with 679,072 startups launched in 2015; however, there remain troubling signs for American entrepreneurship.
First, while the number of startups being launched each year has risen since the great recession, the number of jobs per startup has not. In fact, ever since the dot com bubble burst in 1999/2000, jobs per startup has been declining, bottoming out in 2010 at around 4.5 jobs per new startup launched, and showing no signs of going back up. What does this mean? There are many interpretations, but it may be one sign, that the entrepreneurial ecosystem in the United States is not going to be the economic powerhouse that many expect it to be in the coming decades.
One other troubling sign for American entrepreneurship is from the recent Gallup Hope Index. According to this poll, in 2016 we hit an all time low of only 27% of high school students (grades 9-12) having plans to start a business. This is down from recent years where the number was in the mid to low 30% range. But when you ask the younger generation (fifth to eighth grade) over half want to start a business, the response has been 50 to 55% consistently.
This difference in ambition between age groups has existed for as long as Gallup has taken the poll. Over 50% of younger (middle school age) students have responded positively to starting their own business, while by the time they reach high school, that number decreases to the lower 30% range, and now is down to the upper 20% range. What is unique in the most recent 2016 poll, is the extent of that difference. Never before has the Hope Index been less than the mid 30% of high school students wanting to start their own business. The most recent number is a full 7 points off of the previous average of 34%.
So, what’s happening here? Are students losing that desire and ambition once they get an inkling of how much work it is going to take? Or are they simply moving on to other interests? Whatever the case may be, if the American educational system doesn’t figure out a way to keep the entrepreneurial spirit alive in today’s youth, others may take over as the world’s top innovation space for the next generation of world-class entrepreneurs. And in fact that’s what many are trying to do.
Competitions Drive the Startup Ecosystem
One of the major ways that countries spark entrepreneurial interest in students and the next generation of business leaders is through competitions. Business Plan and Business Case competitions have proliferated across the US and through many universities world-wide. You can’t search for a university’s business school without hearing about their student pitch competition, or accelerator. In fact, many startups get their beginnings through these business pitch contests. Just about every major business school or university in the United States now has a student entrepreneurship competition. For example, you may have heard of the Rice Business Plan Competition, The MIT Clean Energy Competition, NYU Stern New Venture and Social Venture Competitions, Harvard Business Plan Competition, MIT $100k Entrepreneurship Competition, or the Wharton Business Plan Competition among hundreds of others.
We may expect with the head start in entrepreneurship the United States has had, that we should also have the largest student pitch competitions. And while these university competitions have hefty awards and a fair number of student competitions (The Rice Business Plan competition boasts $1.3 Million in cash and prizes to winning teams), unfortunately, this doesn't come close to the sheer number of participants in the largest competition who are now learning how to build their own startups. So who’s the biggest? Probably not who you would expect.
Launched only three years ago in 2015, the “China College Students' Internet Plus Innovation and Entrepreneurship Competition” dominates over other student entrepreneurship competitions across the globe. With more than 1.5 million students from 2,241 universities and colleges participating (according to the Chinese state news agency Xinhua), this Chinese competition is far and away the largest entrepreneurial competition by participation.
In Wait a minute—China and entrepreneurship? Since when did communism support so much entrepreneurial freedom? While the two concepts may not align in theory, the Chinese government seems to have realized that a national push for entrepreneurship is good for their economy. That has translated into massive government support for entrepreneurship along with support from its universities.
According to the Chinese Academy for Social Sciences, whatever the government and colleges have been doing is working. From 2011 to 2017, the number of students starting a business upon graduation in China has risen from 1.6 percent to 3.0 percent. In 2017 that meant about 200,000 new Chinese entrepreneurs entered the economy upon graduation.
"Peking University cultivated my entrepreneurship. And central government policy supports an environment favorable for making innovations," says Dai Wei, the founder and CEO of Ofo, a bike-sharing company that raised over $700 million in funding in July (Xinhuanet). The Chinese government has impressed upon educators the need to be better and to even put their theories and teaching into practice. Teachers are even being encouraged to turn their research into a product and start their own businesses.
How successful China’s entrepreneurial push will be remains to be seen, but if nothing else, it shows that there is a strong interest from China in encouraging the next generation of home-grown global business leaders. The launch of a national entrepreneurial pitch competition for college students demonstrates a strong, central drive to accelerate new entrepreneurial leaders. And the numbers are in China's favor. With nearly three times the number of students in colleges in China versus the United States, this may be an entrepreneurial machine in the making.
The Chinese government has only recently shifted the economy to one driven by consumer spending. So, the concept of entrepreneurship is a relatively new one for them. Does this mean that Chinese entrepreneurial growth is only beginning? We will have to wait and see how this competition expands over the years, and what that means for the Chinese startup economy. What we can take away from all of this for the United States is that perhaps the idea of a national entrepreneurship student competition and overarching economic initiative is not such a bad idea. Could a coordinated national youth entrepreneurship competition turn around the downward trend in entrepreneurial interest seen in the Gallup Hope Index? It may be time to try. Youth entrepreneurship in the United States is still strong, but there are troubling signs on the horizon and there are strong competitors coming up who want to take the reins on the global entrepreneurial ecosystem. It will be an interesting competition in and of itself to see who will maintain the global entrepreneurial leadership in the years to come.