Editor’s note: Guest blogger Colleen Chien is an Assistant Professor of Law at Santa Clara University of Law. She does empirical research on the patent system and has testified before Congress and various governmental agencies on the impact of innovation policy on startups. Her recent study on Startups and Patent Trolls was crunched here and here. You can follow her @colleen_chien or contact her at firstname.lastname@example.org. This is the first post in our Research Spotlight Program.
There’s actually an answer to most questions, but often the data or resources to get to the bottom of it are lacking. Historically it’s been difficult to get good data about startups because young companies have a smaller footprint – in terms of revenues, customers, and other measures tracked by traditional business intelligence firms. Crunchbase, however, has filled this gap to become an invaluable resource for those focused on figuring out what is really going on among startups. This may explain why, as Crunchbase has grown, so has its popularity with researchers as seen on Google Scholar.
Academic research is vital to the startup community. It has shown that most net new jobs come from startups, and that, on average startups are leading the economic recovery. These sorts of findings move to front and center issues that startups care about like immigration, net freedom, and patent trolls. Good academic research also contains operational insights for the startup community.
An excellent example of how Crunchbase has been relied upon by academic researchers is Joern Block and Philipp Sandners’ study of the Impact of the recent Financial Crisis on VC. We all know that recessions make it harder to make money, but by crunching Crunchbase, the researchers were able to more precisely quantify the pain points: a 20% decline in the size of rounds, felt primarily with respect to follow-on funding for startups. In a follow-up study, the researchers fleshed out what this means for startups and our economy:
- In risky times, entrepreneurs should adjust their business plans and messaging to emphasize their recession-proof features
- Typical “credit-crunch” fixes to bank-lending won’t work for startups that rely on VC
- In lean times, governments should keep in mind levers like bankruptcy law, tax law, pension fund policy, and direct investment in startups to ensure that innovators and their financeers still have incentives to take risks even when the economy goes south.
As our economy recovers, these tips for surviving the next downturn will be helpful to keep in mind.