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Are Small-Business Owners Jealous of Tech Start-ups?

Cities are scrambling to create technology hubs to lure talent. But when government programs put financial resources into job creation, certain small-business owners feel ignored.
NYC Startup Job Fair More than 80 start-up companies were represented, with some 600 job openings for the more than 1,000 applicants who attended the event.
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There's no doubt about it: Cities and states across the country have the start-up bug.

You don't have to search too hard to find the enthusiasm, either. In February 2012, the New Jersey Economic Development Authority launched its first-ever state-sponsored tech accelerator, TechLaunch. The public-private partnership allocates about $150,000 from state funds to be invested in start-ups, and each company (there will be about a dozen) will receive about $18,000 in start-up capital. 

In Pennsylvania, the mayor of Philadelphia recently proposed to invest in a new Startup PHL Seed Fund that would spend about $3 million--which would be matched, dollar for dollar, by outside investors--to invest in local start-up entrepreneurs.

And, of course, there's Startup America, the sprawling initiative launched by the Obama administration that's creating miniature start-up ecosystems all around the country by tethering investors to entrepreneurs to economic development boards within cities and towns across the United States.

This should be a good thing, right?

For tech entrepreneurs, absolutely. But for traditional small-business owners? Well, it's a bit unclear.

Many small-business owners, it seems, are beginning to chafe at the idea that precious economic resources--both at the local and federal level--would be spent on fledgling start-ups and not committed to established businesses.

That sentiment was captured recently when Startup Weekend descended upon Denver.

Cori Streetman, the principal of Barefoot PR, a Denver-based public relations firm, recently told the Denver Post that "incubator programs, investor competitions, or the chance to pitch my business idea for a quick turnaround are not the resources that my business or others like mine are looking for."

And Brian Smith, the owner of Space Creators, a small real estate business, told the Post, "Having a focus on the businesses that exist here now and nurturing them will ultimately lead to greater economic impact than any start-up work that we do here in Denver."

That's a fairly bold claim and one that economists have tussled with for years. What sorts of companies create jobs faster? It's a notoriously complex question, mainly because the definitions of small business are varied. So although it's true that anywhere from 75% to 90% of start-ups fail in their first five years, it's difficult to predict which economic policies will--at least in terms of job creation as a barometer of growth--have the most bang for the buck.

So although some business owners grow rankled at the idea of resources being used to fund highly risky start-ups (at the expense of incumbent businesses), the reality is that a hedged approach to investment is perhaps the greatest method of helping both entrepreneurs and more traditional business owners.

Aaron Chatterji, an associate professor at Duke University's Fuqua School of Business and a former senior economist at the White House Council of Economic Advisers, recently said as much in The Wall Street Journal.

"Traditional small businesses are important sources of jobs in every community," he says. "But start-ups with big potential need different kinds of assistance to thrive--and we need them to thrive, especially in today's economy. The one-size-fits-all approach just doesn't make sense any more."




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