VIDEO: Latest data is sobering news for entrepreneurs

Üllo is a new Chicago-based startup that produces a wine purifier. (Andrew Fowler/Medill Reports)

By Andrew Fowler

Entrepreneurs considering starting a business have always had to weigh the risks against the potential rewards, but most recent data from the U.S. Census Bureau, released last year, is sobering news for startups.

In 2008, during the height of the recession, the rate of businesses failing exceeded the rate of new businesses being started. That trend has continued through 2011 when the Census data, which lags a few years behind because it comes out slowly, ends. Analytics group Gallup reports that the United States is 12th among developed nations in startup activity.

Jim Clifton, the C.E.O. of Gallup, wrote in an online post earlier this year about the issue, “this is our single most serious economic problem. Yet it seems like a secret.”

Business death rate more than business birth rate
In 2008 the business death rate exceeded the birth rate of new businesses. (Andrew Fowler/Medill)

Steve Collens, the C.E.O. of Matter, a company that offers workspace and support to health care startups, said new businesses are vital to the future of the economy because they help create jobs.

“We have 80 companies here and you can imagine it doesn’t take a whole lot of them to scale at [high levels] before we start talking about thousands and thousands of new jobs in just a short few years,” Collens said.

Üllo is one of the companies housed at Matter. James Kornacki, 28, the C.E.O. of Üllo, created a filter that takes the sulfites out of wine. Sulfites, in addition to being a preservative, can also make some people sick.

Kornacki said Üllo is a business idea that started back when he was 12 years old at a family Christmas party. He remembers his aunt mentioning to him that a doctor told her that she couldn’t drink wine because of the sulfites.

“I went all the way back to when I was 12 years old and I remember my aunt turning the wine away,” Kornacki said. “I thought if this is something I could solve, this is something a lot of people would benefit from.”

Kornacki said he doesn’t worry about Üllo, a company and product that he considers to be very personal, going under.

“I recognize that it’s a possibility and I do everything I can to make sure we don’t go anywhere near that possibility,” Kornacki said.

One thing he is doing to make sure Üllo stays afloat is using Kickstarter to launch a crowdfunding campaign in June to raise money to start producing the wine purifier. The success of this campaign will have an effect on the direction Üllo takes in the future. Kornacki’s business partner, Joe Radosevich, is weighing whether to join Üllo full time after he graduates with a master’s degree next month.

“If the Kickstarter does really well, I’ll stay on and we’ll go from there,” Radosevich said. “If it looks like Üllo might need to change its identity in the long haul, it’s tricky. But I hope to be with Üllo so long as Üllo is around.”

It’s not all bad news. According to Dow Jones, venture capital in the first quarter of 2015 was 27 percent higher than in the year-earlier quarter.

“The risk all comes down to money,” Kornacki said. “You need money to survive.”

Fundraising for new businesses was down, though, in the first quarter compared with the year-earlier quarter.

Photo at top: Üllo is a new Chicago-based startup that produces a wine purifier. (Andrew Fowler/Medill Reports)


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