Jeffrey Sparshott reported this week at The Wall Street Journal Online that, “The U.S. economy is inching along, productivity is flagging and millions of Americans appear locked out of the labor market.

“One key factor intertwined with this loss of dynamism: The U.S. is creating startup businesses at historically low rates.

“The American economy has long relied on fast-growing young companies to fuel job growth and spread the latest innovations. As recently as the 1980s and 1990s, a small number of young firms disproportionately contributed to U.S. employment growth, helping allocate workers and resources to burgeoning segments of the economy.”

The Journal article noted that, “But government data shows a decadeslong slowdown in entrepreneurship. The share of private firms less than a year old has dropped from more than 12% during much of the 1980s to only about 8% since 2010. In 2014, the most recent year of data, the startup rate was the second-lowest on record, after 2010, according to Census Bureau figures released last month, so there’s little sign of a postrecession rebound.”

Graph From The Wall Street Journal

Mr. Sparshott also pointed out that, “The share of employment at such firms, meanwhile, has slipped from nearly 4% to about 2% of private-sector jobs.

“While only a few percentage points, the drop translates into hundreds of thousands of companies and jobs. If the U.S. were creating new firms at the same rate as in the 1980s, that would be the equivalent of more than 200,000 companies and 1.8 million jobs a year.”

The Journal article added that, “The startup slowdown may have a number of causes. Perhaps some companies need more time than backers are willing to provide. Demographics may also explain some of the shift—baby boomers are retiring and millennials are just entering the age bracket that is most common for entrepreneurs.

“Rules and regulations also could be at play. Goldman Sachs economists in part blame the cumulative effect of regulations enacted since the Great Recession for reducing the availability of credit and raising the cost of doing business for small firms, making them less competitive.”

Rolfe Winkler reported yesterday at The Wall Street Journal Online that, “Venture capitalists are always chasing the next big thing. Of late, they are struggling to figure out what that might be.

“Nearly a decade has passed since the smartphone sparked a startup gold rush. Silicon Valley investors have yet to identify the next product that will spawn a similar wave of tech companies and lucrative returns.

“Venture capitalists are spreading their bets across technologies where the path to profits is unclear, including self-driving cars, drones, artificial intelligence, virtual reality, even food.”

The article noted that, “Veteran investor Steve Jurvetson of Draper Fisher Jurvetson said his firm is backing companies in agriculture, robotics, artificial intelligence and aerospace. ‘A ridiculous amount of money will be lost foraging into all these areas,’ he said. ‘But the greatest opportunities are in those sectors.'”

The Journal article explained that, “Venture investors are getting antsy as they sense a lull at the end of an investing cycle, said Elad Gil, founder of cancer-testing software startup Color Genomics Inc., and an investor in highly valued startups Airbnb Inc. and Pinterest Inc.

“‘Trying to find what’s next, you start investing in a lot of stuff you don’t understand,’ said Mr. Gil. Venture capitalists, he said, are sitting on funds they feel they need to deploy.

“Mr. Jurvetson said one way to avoid bad bets is to steer clear of capital-intensive projects, a mistake his firm and others made when they bet on some early clean-technology companies.”

Recall that an article in last week’s Wall Street Journal noted that, “Insurance is becoming a fashionable bet.”  More specifically, the article stated that: “More venture capitalists now are looking at new companies that want to displace the insurance agent, rather than the loan officer.”

With this background in mind, Matthew Patane reported in the business section of yesterday’s Des Moines Register that, “When Burch LaPrade was preparing to launch a startup based around insurance, he didn’t know there was an industry already for ‘insurtech.’

“‘I didn’t even know that was a thing,’ LaPrade said.

“Now, though, his company Gain Compliance has joined a growing wave of insurance-technology startups.

“The insurtech industry has emerged and grown, particularly over the last two years, as more investors and entrepreneurs look to alter the entrenched ways of U.S. insurance firms.”

The Register article noted that, “Investment in insurtech companies reached $580 million to $740 million in 2014, according to reports from CB Insights and Financial Technology Partners. It topped $2.6 billion in 2015.

“Insurtech startups have focused on new forms of insurance, such as on-demand products, to changing distribution and underwriting systems, to applying data to better estimate premiums.

“And, in central Iowa, it may represent a new wave of startups similar to the slate of financial technology firms that emerged over the last decade, such as Dwolla, Banno and Smarty Pig.”

Mr. Patane pointed out that, “Gain Compliance is one of at least two insurtech startups that have launched in the Des Moines area since August. Founded by three ex-Workiva employees, it is developing software to help insurance companies improve data quality used in compliance reporting.

“The second local startup, Denim, has developed a social media advertising platform for companies to use to promote their agents.”

Yesterday’s article added that, “‘I think we’re at one of these points in time where the insurance industry is figuring out, ‘Hey, we can’t continue to sit on the sidelines” of new technology, Denim co-founder Gregory Bailey said.”

Peter Rudegeair reported this week at The Wall Street Journal Online that, “An early investor in the online-lending boom has turned its sights to life insurance.

“Ladder Financial Inc., a Silicon Valley startup that offers term-life-insurance policies for California residents, said Wednesday it raised $14 million in a new fundraising round led by Canaan Partners. The venture-capital firm was one of the first outside investors in LendingClub Corp., a pioneer in financial technology.

“Insurance is becoming a fashionable bet. Competition in online lending has become more intense, and investors have become more skeptical of loan quality. More venture capitalists now are looking at new companies that want to displace the insurance agent, rather than the loan officer.”

The Journal article noted that, “U.S.-based startups in the insurance sector attracted $856 million in venture-capital investment over the first nine months of the year, 84% more than in the same period in 2015, according to preliminary data from Dow Jones VentureSource that includes auto, health and life-insurance players. Lending startups, meanwhile, took in $651 million in venture-capital investment, a 73% decline from 2015.”

Mr. Rudegeair added that, “Although the industry is massive—U.S. life-insurance premiums totaled $777.5 billion in 2015, according to the National Association of Insurance Commissioners—the amount of money regulators require that insurers keep in reserve has scared off many venture capitalists.

“To get around this obstacle, Ladder entered into a partnership with Kansas City-based Fidelity Security Life Insurance Co., in which it would serve as a “managing general agent” for the insurer. Managing general agents are empowered by insurers to sign up customers and, in some cases, underwrite new policies, but they aren’t regulated as insurers themselves.”