Since I wrote in 2009 about the Kauffman Foundation's findings (based on U.S. Census Bureau data) that young firms are the primary source of new jobs, I have seen Kauffman's research pop up again and again in pleas to policymakers not unlike those the Missouri-based nonprofit made here, which prompted my post above.

The plea to governmental decision makers?  Don't provide funding to small businesses en masse.  Instead, spend the majority of taxpayer dollars on startups; helping them to grow faster and get on a path to long-term success will spur not only quicker job growth, but sustained growth.

One of these pleas I saw this week that I liked is on venture capitalist (and former entrepreneur) Jeffrey Bussgang's Seeing Both Sides blog.  He cites Kauffman's research from a long period (1997-2005) showing that "job growth in the US was driven entirely by start-ups."

Based on this, I was curious to see if this disparity – job growth among startups far exceeding that of growth and later-stage firms – held up among the latest sample of Winning Workplaces' employee engagement research: the 341 applicants of our 2011 Top Small Company Workplaces award.

Part of my curiosity was in looking at job growth in an overall period of decline for many organizations, as opposed to the "boom" period Kauffman examined that Bussgang cited, going from the late 1990s to the mid-2000s.  By contrast, our data on employee growth from 2008 through 2010 takes into account the Great Recession and subsequent recovery efforts.  In terms of looking at startups, it so happens that 2008 is the latest year we can look at: one of our award criteria is that companies be at least 3 years old.

Among all of our 2011 award applicants, the table below shows the share that are startups* versus those at growth or later stages:

pie chart

Though the startups in our pool are in the minority, they follow the pattern reported by Kauffman, the U.S. Census, and others (including ADP).  Simply put, we see that even in a down period, job growth is notably higher in startup firms:

table

Related: A common challenge cited by many owners as their business grows is maintaining a startup feel, especially when it comes to being flexible and nimble.  Our Success Story on IT company Fieldglass shows how people practices keep employees engaged as a means of overcoming this hurdle.

*For our purposes, we used Seattle 2.0's definition of a startup as being less than 6 years old.  Since our minimum company age was 3 years, this allowed us to include a greater survey sample that still aligns with what many VCs consider as pre-growth stage firms.