Using the Business Dynamics Statistics database I show that (i) young firms are mainly small, but small firms are not always young, (ii) job creation and destruction rates fall with firm age and young firms create relatively more net jobs, (iii) there is a strong up-or-out tendency of young firms, (iv) young firms are more volatile than older businesses and (v) firm entry is important for unemployment rate developments. Next, I build a general equilibrium model with heterogeneous firms that is consistent with these facts and generates realistic aggregate labor market dynamics. The model is then used to evaluate a government policy supporting young firms, a measure proposed under the recent “Startup America” initiative of the White House. The results suggest that such policies should mainly focus on easing barriers to entry. Supporting existing firms disrupts the natural selection process among firms, reducing average firm productivity and resulting in lower levels of output.