Entrepreneurial Activity During the Recession
The new Kauffman Index of Entrepreneurial Activity has just been released for 2009 and the report indicates that 2009 had the highest number of new U.S. business startups since the index started in 1996. There were an average of 558,000 new full-time businesses started each month of 2009, for a total number of startups of 6,696,000 for the year.
You won’t find anything close to this number published by the U.S. government, because most government agencies do not count non-employer businesses as startups—even though they make up 70% of all American businesses (and contribute a Trillion dollars to the GDP). Thankfully, we have the Kauffman Foundation.
Here are some of the highlights for 2009: (The following numbers are expressed as the number of new businesses created each month out of 100,000 adult population.)
- 340 out of 100,000 adult population created a new business each month of 2009. This is also the third straight year of increased rates of new business startups.
- Men created new businesses at the rate of 430 per month…a slight increase over 2008.
- Women created new businesses at the rate of 250 per month…also a slight increase over 2008.
- African-Americans had the highest rate of increase in entrepreneurial activity in 2009, with 270 new businesses. In 2008, the rate was 220 per month.
- Latino entrepreneurial activity dropped from 2008, but still had the highest rate for 2009 at 460 new businesses…against 480 new businesses in 2008.
- Immigrant-owned startups were higher than native-born, with 510 new businesses. Native-born entrepreneurs started 300 new businesses in 2009.
- The oldest age group (fifty-five to sixty-four) continued their upward trend of startups with 400 new businesses in 2009.
- The youngest group (twenty to thirty-four) had the lowest new business creation of any age group, at 240 new businesses.
- The West continued to lead the country in creating new businesses, with 380, while the Midwest continued in last position with 270. However, the Midwest did show a sharp increase from the 230 new businesses created in 2008.
- Houston had the highest rate of new businesses in large cities, at 630, while Seattle had the lowest rate at 160.
Remember, the above numbers represent the number of new businesses created each month, per 100,000 adult population.
Men, African-Americans, Latinos, older people, and immigrants seem to lead the activity of entrepreneurial startups. Sadly, the youngest group (twenty to thirty-four) peaked way back in 1996 at 280 new businesses, and have consistently been under that number ever since.
I wrote about the dearth of women entrepreneurs previously, but they too have not matched their peak startup year of 1996.
Obviously, the “startup” business is good. Three straight years of increases in the startup rate—right through the recession—seems to indicate that a small business can be created anytime, regardless of economic conditions.
So, for all of you who have been waiting “for things to improve,” I think right now might be the best time for you to start your business. Debbie Fields, founder of Mrs. Field’s Cookies, said, “The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try.”
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Today’s Innovators
Many of today’s business “gurus” and investors do not consider a person an entrepreneur—nor their business a startup—unless they have a high-tech product. Business web sites, blogs, and ezines all seem to promote high-tech as the primary means to innovative salvation of America’s economy.
That’s a shame because with more and more U.S. high-tech being outsourced to other countries, it is now more important than ever that we acknowledge and support the “real” startups—those that do not involve high-tech products. Of the over six million new businesses started each year, only a handful of them are considered high-tech, yet they are the ones that attract the attention of investors, the government, and the media. Very few people acknowledge that the remainder of the six million even exist.
Take for example, Annie Haven, who started her business in 2005 and has steadily grown 30 percent a year ever since…with customers as far away as Spain and Singapore. And what is Annie’s business? She sells dried cow manure on the Internet.
Annie grew up on a cattle ranch and developed a process for drying cow manure and packaging it in 3 inch by 5 inch “tea” bags. The “tea” bags can then be steeped in 5 gallons of water to make liquid fertilizer for plants and gardens. Since the cattle are free range and eat only organic food, the fertilizer is also organic—and all natural.
To me, that is pure innovation…good old-fashioned American ingenuity…and we need to encourage and support more people like Annie Haven. Whether through the media, private investors, or the government, more attention needs to be paid to the “simple” innovations and creations that are being carried out every day by totally unknown and out-of-the-spotlight people.
My hat is off to Annie, and all the many unsung innovative entrepreneurs around the world.
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Women in High-Tech
I recently read an article in the New York Times about women in the high-tech industry, particularly Silicon Valley. It was quite discouraging information, but it does give some insight into why the U.S. is falling so far behind the rest of the world in innovation and information sciences.
Here are some highlights from the article:
- Women own 40 percent of private businesses in the U.S., but create only 8 percent of venture-backed tech startups.
- Just 14 percent of Venture Capitalists are women.
- Women outnumber men at elite colleges, law schools, medical schools, and the overall workforce, but are noticeably scarce in the high-tech world.
- Only 18 percent of college students graduating with computer science degrees in 2008 were women—down from 37 percent in 1985.
- Only 1 percent of girls taking the SAT in 2009 said they wanted to major in computer or information sciences.
- Mixed-gender teams have produced technology patents that are cited 26 percent to 42 percent more often than the norm.
- Women have few role models in high-tech.
These are just a few of the key points presented in this illuminating article. I highly recommend the article, because it speaks directly to our country’s decline in innovation and loss of high-tech leadership.
The title of the article is Out of the Loop in Silicon Valley, by Claire Cain Miller. I included a link here.
It is Never Too Late
Sometimes we don’t realize our true potential until we get a bit older. I have always appreciated the wisdom and capabilities of the older generation—we can all learn much if we just listen. So, today I am combining the recent success of an older person with the success of one of my favorite entrepreneurs, Mark Johnson.
Here’s what I mean:
If that is not inspiration enough, check out Mark Johnson’s interview on the Bill Moyers Journal show.
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