By Angie Chang (Co-Founder & Editor-in-Chief, Women 2.0)
The Kauffman Foundation released an animated sketchbook video illustrating the importance of finding the “magic sauce” for startup success.

The video points out that “nearly 700,000 new businesses start every year, but the failure rate is high and many of them are not creating jobs,” and asks, “How do we make those firms more successful at the outset?” President and CEO Carl Schramm of the Kauffman Foundation narrates:

“We have sort of a naturally occurring base in our society of entrepreneurs, and that’s a cultural difference that stands in the United States and it produces about 700,000 people who want to start a new firm every year.

Now our question, if you want more growth, and this is an issue really important in times of a downturn, a recession, is we got to have more of those people — because they create jobs, they make the country wealthier — how do you get them? No one has ever probed that idea before, so the Kauffman Foundation taking it as a challenge. We have an idea that you should democratize the process of entrepreneurship — make it look easier and be easier for people to go pursue.

It’s said that businesses fail at an astounding rate, maybe as many as 8 out of 10 businesses will fail in the first five years. The fact is we really don’t know those statistics very well, and it’s one thing not to know those statistics. The scandalous thing is we don’t know how to make those firms more successful at the outset. These are two jointly connected problems — people would start more businesses if they had a sense they were going to be more certainly successful.

Now the third thing we’re trying to figure out is, how do you make new companies grow faster? It’s just another dimension of success.

America is famous for high-growth companies, but we don’t know how to make high-growth companies. If you have two companies starting, there is no magic sauce that you pour in one end and it becomes a high-growth company, so in a sense we’re looking for the magic sauce. Now that’s a complex job.

Is it the people who are involved? Is it where it’s located? Is it the technology that is involved? Is it the way it’s financed? Is it other people who come join the founders? Is it a way to read markets correctly? Do people have to have a better understanding on how to price product in the first year, second year, third year? Do they basically outsource production because there’s already people who are doing something? If you do that, how do you protect your intellectual property so that the people you are outsourcing to don’t go steal your great idea and become your competitor?

These are all unsolved problems, and it would be great if we could solve those problems because we would have a lot more success as a result. So that’s the challenge that confronts us.

We do a lot of statistic building here at the Kauffman Foundation, we do a lot of research because if you don’t get the story right, you’ll get the solution wrong. It’s places like the Kauffman Foundation that are outside the university world, outside the government world, you know, outside the think tank world, that have the freedom to ask these questions and this is a very precious commodity. It’s the freedom to ask these questions.

If you think about this, the single best indicator of whether a country is going to grow or not is the number of new firms that are created every year. That’s a very powerful statistic. Once you understand that statistic, then it becomes compelling to begin to understand how do you get more people to go on this journey, you’ll make people’s lives richer — they become authentic, they find themselves, they find their true self, and they are the people that build America.”

The Kauffman Foundation aims to “demystify the phenomenon of entrepreneurship and bring to light messages about the important role entrepreneurs play in innovation, job creation, and economic growth.”

Women 2.0 is here to help you get started on your big idea.
Join us for Women 2.0 Startup Weekend on November 18-20, 2011 in San Francisco, CA for a full weekend of building new businesses and tech startups.

We will have plenty of people, from startup CTOs and developers serving as mentors and participants, ready to help you realize your startup dream and make it happen.

Early bird tickets are available until November 1 — Come build something big over a weekend, or at least, give it a shot.

About the guest blogger: Angie Chang co-founded Women 2.0 in 2006 with Shaherose Charania. She currently serves as Editor-In-Chief of Women 2.0 and is working to mainstream women in entrepreneurship. Previously, Angie held roles in product management, web UI design, and entrepreneurship. In 2008, Angie launched Bay Area Girl Geek Dinners, asking that guys come as the “+1” for once. Angie holds a B.A. in English and Social Welfare from UC Berkeley. Follow her on Twitter at @thisgirlangie.