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Study Finds 2000 Was Worst Year To Found Silicon Valley High-Tech Company

SAN JOSE (CBS SF) - Only one in six high-tech companies that started in 2000 in Silicon Valley remained in business at the end of the decade, according to a report released Tuesday by the U.S. Bureau of Labor Statistics.

The report looked at the era of the dot-com bubble in the early 2000s when "anything with dot-com in its name was a can't-miss investment," said economist Amar Mann, one of the report's co-authors.

More than 25 percent of the startups in Silicon Valley in 2000 were Internet companies, while the average for other years is generally around 10 to 15 percent, Mann said.

Internet companies are often easier to start than other industries since they tend to be small and don't require a lot of investment. However, they were a lot less stable—of the 7,045 Internet jobs that were created in 2000, only 1,161 were still there in 2009.

2000 was also by far the year with the highest amount of money invested by venture capitalists, who spent nearly $35 million that year, roughly twice as much as any other year in the past two decades, Mann said.

Mann said the report was simply trying to see what industries survived or sank during the dot-com boom and bust of the 2000s, but would not likely provide any lessons for those companies.

"Whatever lessons there are for businesses to learn, I think they've already learned it," he said.

Mann said the Silicon Valley business landscape is more diversified now than in 2000, with many industries like wireless applications, online gaming and clean technology that were not even around back then.

Although there are less jobs there now than in 2000, "wages are way up" and "high-tech continues to be a very important driver of jobs in this area," Mann said.

"Things have certainly changed a lot," he said.

The report considered Silicon Valley to consist of Alameda, Contra Costa, San Francisco, San Mateo, Santa Clara and Santa Cruz counties.

Companies that were acquired by another firm were not included in the study, although Mann said those companies only made up about 1 percent of the total.

(Copyright 2011 by CBS SF. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)


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