Faced last year with an evolving market threatening his cellphone-repair startup business, Dylan Mckerchie knew he had a decision to make. Amid rising mobile device and repair costs, new influx of competitors and wireless carriers offering customers attractive upgrade plans, the entrepreneur needed to find something to supplement his income.
The question quickly became, “How?”
“The challenge for a lot of people right now in any industry is honestly where to go, where to put your money,” he said. “Everything is so up in the air right now.”
Ever the entrepreneur, Mckerchie did two things. The 37-year-old shifted his cellphone business strategy from repair work to consulting services and began brainstorming for his next project – Dylanpickups.
Through the business, he designs and produces electric guitar pickups, a small part on the instrument that turns string vibrations into electrical current. Mckerchie, now on his seventh startup since age 17, also has partnered with a wood craftsman and entered into the custom-built guitar business.
Currently in the marketing phase, they are eying celebrity endorsements, such as ZZ Top’s Billy Gibbons, and hope to target a global mainstream demographic. The instruments will range in price from $1,000 to $1,500.
“There’s this point of stagnation where you have to create your next thing,” Mckerchie said. “Either that idea just kind of wilts and gets put in a drawer, or it gets pushed over the edge into something that really can make money.”
A RECENT REPORT released by the Brookings Institution indicates many entrepreneurs are choosing the former.
The May study, compiled for the Washington-based think tank by two economists, provides a grim synopsis: the country’s entrepreneurial spirit is on a downward swing and has been so for the past 30 years.
Data showed the number of startups entering the market has slipped from 15 percent in 1978 to 8 percent in 2011, which is the latest year statistics were collected. During that same time frame, the amount of firm failures remained relatively steady at about 10 percent.
The study, titled Declining Business Dynamism in the United States: A Look at States and Metros, also found business exits are outnumbering entries for the first time in more than three decades. The pace of net job growth also has slowed, it showed.
The researchers define business dynamism as the process occurring when firms are created, fail, expand and contract, which are all necessary for business productivity and sustained economic growth, they said. Entrepreneurs play a crucial part in the process, they added.
Holly Wade, the senior policy analyst for the National Federation of Independent Business, notes that the recent recession has accelerated the descending trend in startups. She tossed out changing cultural perceptions in risk-taking and business policies as possible drivers behind the results, but said the root of the problem remains elusive.
“Unfortunately, it’s very difficult to define or look to see what the major contributors are to figure out ways to fix this historical trend,” Wade said. “How people see opportunities now, because of the recession, I’m sure will be reflected in what startups look like in the next couple of years. Hopefully, there’s a strong rebound in the data that will continually come out.”
The Brookings report doesn’t cite specific causes for the decline, but concludes the slowdown in startups pervades across state boundaries and job sectors. Businesses are more apt to keep a tight grasp on money, less people risk launching a company and fewer workers are changing jobs, the study stated.
The report did break down statistics on a state and metro level.
IN GEORGIA, the business entry rate was 14.2 percent from 1978 to 1980 and 8.4 percent from 2009 to 2011. The number of firms exiting the market, on the other hand, has held steady at just below 11 percent.
In Augusta-Richmond County, new startups have been cut in half since 1978-80, when they were about 12 percent of new business entries. In 2009-11, that number dropped to about 6 percent.
However, the amount of firms going under in Augusta dropped from 9.7 percent in the late 1970s to 8.2 percent three decades later.
“It’s a number’s game,” said Startup Augusta founder Tony Lever. “We have to come to terms that failure is part of the process. Not everything is going to be a winner.”
Lever, who started his own pine straw delivery company in 2004, created Startup Augusta earlier this year as a way to link budding entrepreneurs with experienced business people to foster Augusta’s startup movement. The group is in the process of setting up an angel investment network to help new businesses with funding.
With the incoming Cyber Command headquarters at Fort Gordon and booming health IT field, Lever said he expects the pendulum to swing back in favor of new-business creation within the next decade.
At The Clubhou.se on Broad Street, founding members Grace Belangia and Eric Parker said marketing, and not funding, is the biggest issue they encounter when working with entrepreneurs. A successful end product, they said, is built on an even diffusion of technology, design and marketing.
“I guarantee that we can get any company funded if they know what their product is, if they know who their market is and how to reach them,” Parker said. “Most people just think, ‘I have this really cool thing,’ and they don’t think about who’s going to buy it. They might think about who’s going to use it, but who’s going to pay for it is a completely different thing.”
The Clubhou.se opened in December 2012 to provide a co-working and collaborative space for entrepreneurs, startups, engineers, software designers and tech-driven individuals. The organization now has about 50 members and 23 local companies that use the downtown space.
Each week, The Clubhou.se invites company founders to a roundtable meeting where they discuss and troubleshoot ranging issues.
Clubhou.se members Chad DeMeyers and Kevin Huffman started E3 Embedded Systems a year ago as a way to simplify the design process for engineers and hobby enthusiasts. Users across different platforms are able to use the small device by plugging in a variety of processor boards into the motherboard.
“We live in a world of smart phones, smart appliances and soon-to-be smart everything,” DeMeyers said. “I think the demand for this kind of hardware is only going to grow. It was a calculated risk.”
Tishun Nikco, who is starting an image consulting, styling and brand management company, said doubt can occasionally creep in but she keeps her faith in God and hard work that everything will turn out right.
“When you’re ready, so many people will give you insight,” said Nikco, who just quit her day job in May to pursue her passion. “Every day, you give it your all.