Missouri startups created nearly 36,700 jobs in 2020, according to the Show Me Jobs report released by MOSourceLink. That represented a decrease of about 2% from almost 37,600 new startup jobs in 2019, and it fell below the five-year average of 37,300.
Those jobs were split across almost 16,300 new businesses last year, which was a slight uptick from the roughly 16,000 first-time employers in 2019.
MOSourceLink, a Kansas City-based nonprofit that works to connect entrepreneurs to resources, issues the report to provide data on new businesses and the impact they have on job creation. The report used data from the Quarterly Census of Employment and Wages produced by the U.S. Bureau of Labor Statistics. For the purposes of the study, a startup was defined as a first-time employer with less than 20 workers.
Startups are a crucial driver of economic and job growth, according to research from the Ewing Marion Kauffman Foundation, which provides financial support to Missouri Business Alert. The role of startups in job creation is reflected by the fact that startups created more than 168,000 jobs from 2016 to 2020, which was 79.7% of all new jobs in Missouri and 6.7% of total employment in the state, according to the MOSourceLink report.
Wages for startups as a whole tend to start below the state average, but by a company’s fourth year they often grow to exceed the state average, the report said. Tech firms are a particularly promising subsection of startups, often having the highest growth potential of early-stage companies and paying more than double what other startups average.
Despite their strong growth potential, startups don’t come without significant risk. Nationally, about 20% of small businesses are forced to shut down within their first year. In Missouri, roughly 12,300 startups from 2016 had ended operations by 2020, according to the report. Those businesses failures result in significant job losses, but the startups that survive go on to out-hire that number over time, resulting in net job gains.
More than half of the state’s new businesses in 2020 — or about 8,600 startups in total — were in the health care and social services sector, according to the report. Professional, scientific and technical services was the only other sector in which there were more than 1,000 new startups last year.
As Missouri continues to recover from the effects of the COVID-19 pandemic, new businesses could become even more important. The pandemic forced thousands of small businesses to shut down or cut back on jobs, leaving an opening for job creation by startups.