many found themselves unemployed or in part-time jobs during Covid-19 lockdowns. The Kaufmann indicators of

early-stage entrepreneurship found that the rate of newentrepreneurial activity reached its highest level for 25 years in 2020, with an average of 380 of every 100,000 adults becom- ing entrepreneurs in a givenmonth. Philip Gaskin, vice president of

Source: Olav Sorenson, Michael S. Dahl, Rodrigo Canales, M. Diane Burton (2021) DoStartupEmployeesEarnMoreintheLongRun?

supporting the creation of new firms, particularly in innovative sec- tors such as ICT. But with start-up failure rates as high as 90%, remu- neration offered at early-stage com- panies often falls short. A recently published study of

Danish registry data between 1992 and 2011 found that, on average, employees hired by start-ups earn roughly 17%less over the next 10 years of their career than those hired by larger, established firms. Those joining start-ups with largenumbers ofemployees earned a slight pre- mium, according to the study. “Blind enthusiasm for entrepre-

neurship seems wrong,” Olav Sorenson, professor of strategy at UCLA and a co-author of the Danish study tells fDi in a joint interview with is co-author, Rodrigo Canales. “The question is whether or not it is possible to craft policies that gener- atemore rapidly growing start-ups without having lots of small experi- ments that fail,” he explains. Mr Canales, an assistant profes-

sor of organisational behaviour at Yale, agrees: “If the main purpose of start-up ecosystems is to create a bunch of good jobs, that is probably the wrong objective.” While some start-ups may grow

to become large firms and create many jobs, Mr Canales believes more common benefits of start-up ecosys- tems include business model inno- vation and personal development for workers. Jeppe Rindom, the co-founder

and chief executive of Danish fintech unicorn Pleo, which offers payment cards foremployees to buy work- related products, is not surprised by the study’s findings. He notes that start-ups often compensate staff with stock warrants that only pay out if the company is successful, and that some applicants are willing to


take a pay cut of 10%to 20% for the learning experience “We hire candidates that really

take a deliberate choice of having a career in start-ups,” he says. “They value the journey and educa- tion from being part of building a business.”

Innovation potential Between June 2017 and 2021, the number of activemonthly start-up jobs in Denmark grew from203,000 to 844,000, according to Danske Bank’s Hub initiative. Camilla Rygaard-Hjalsted, the

chief executive of Digital Hub Denmark, a non-profit that pro- motes the Danish tech ecosystem, says start-ups have a dual purpose. “They can either take off and

become unicorns, which is huge for the country in terms of job crea- tion and investment,” she explains. “Or start-ups help digital transfor- mation at corporations that are falling behind.” In a world where industries are

being redefined by disruptive tech- nologies, such as blockchain, quan- tum computing and artificial intelli- gence (AI), established firms have increasingly made bets on start-ups as a means to foster innovation and stave off competition. In 2020, corporate venture capi-

tal (CVC)-backed funding of start-ups reached an all-timehigh of $73.1bn, an increase of 24%from 2019, according to a report by CB Insights, even if the number of CVC-backed deals fellmarginally by 1.7% over the same period.

Rising entrepreneurship The Kauffman Foundation, a private, non-partisan organisation that pro- motes and tracks US entrepreneur- ship, has also seen a sharp increase in people starting businesses, as

entrepreneurship at the Kauffman Foundation, tells fDi that their research indicates business creation increases in economic downturns. “Entrepreneurship drives econo-

mies,” he says. “New entrepreneurs have the ability to take an idea and turn it into a reality, and to create more new jobs than big businesses. But the hurdles they have to jump through to start these businesses need to be reduced.” While start-up early survival

rates in 2020 fell to their lowest level since the Great Recession, the averagenumber of jobs created by US start-ups in their first year stood at 5.03 per capita, according to Kauffman. Internationally, perceptions of

entrepreneurship have been impacted by the pandemic, too. An annual survey across 43 countries, conducted by the Global Entrepreneurship Monitor (GEM), a research consortium, finds that uncertainty has presentedmore opportunities for entrepreneurs. Aileen Ionescu-Somers, the exec-

utive director of GEM, says that the “chaos” thrownup by Covid-19— such as big shifts in trade and shop- ping, changes to behavioural pat- terns and disruption to business models—has ledmany to consider pursuing newventures. “Early-stage entrepreneurs

tended to seemore opportunities in the pandemic, perhaps because they hadmore flexibility to pivot, than those who had been operating their businesses formore than 42 months,” she adds. But in terms ofwhich start-ups

create themost value, Ms Ionescu- Somers notes that capital-intensive and those requiring more skilled workers tend to pay better, and have themost potential to create jobs and wealth in local economies. “By their nature, tech start-ups

have products and services that are very much differentiated fromother start-ups, so the barriers to entry are high,” she explains. “Easy entry August/September 2021

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