Entrepreneurship Reverses Downward Trend

The Kauffman Foundation has been publishing the Kauffman Index of Entrepreneurship for the past 18 years and this year they have expanded their effort with additional data and more in-depth analysis.

The first installment of this new Index is titled “Kauffman Index: Startup Activity” and was released last week. This installment covers national startup data. City, state, and regional information will be released on June 6th.

The most important finding in this 2015 Index is that the decline in entrepreneurship has been reversed after a number of years of steady downturn.

These new numbers represent the greatest year-over-year increase in entrepreneurship over the last two decades.

Does this mean the U.S. is experiencing a revival in entrepreneurship?  Not necessarily, because we are still in a long-term decline of new business creation.

Take a look at the chart below, which depicts the rate of new business creation per thousand population:

New Businesses - 2914

 

The biggest disappointment in Kauffman’s new numbers is the declining number of female entrepreneurs. Since the Kauffman Index started in 1997 the share of new entrepreneurs who were female fell from 43.7 percent to 36.8 percent in the 2015 Index.

Summary

Here are more highlights from the 2015 edition of the “Kauffman Index: Startup Activity.”

  • Approximately 6,360,000 new businesses were created during 2014.
  • 63.2 percent of new business owners were male.
  • The share of new entrepreneurs with a college education jumped from 23.7 percent in the 1997 Index to 33.0 percent in the 2015 Index.
  • Those with a high school, or less, education still make up the majority of new business owners with 44.6 percent in the 2015 Index.
  • Younger entrepreneurs, ages 20 to 34, continue to decline—from 34.3 percent in the 1997 Index to 24.7 percent in the 2015 Index. (Those under age 20 are not counted.)
  • Older entrepreneurs, ages 55 to 64, continue to increase—from 14.8 percent in the 1997 Index to 25.8 percent in the 2015 Index. (Those over age 64 are not counted.)
  • Immigrant entrepreneurs increased from 13.3 percent in the 1997 Index to 28.5 percent in the 2015 Index. (See my article on immigrant entrepreneurs here.)
  • Immigrants continue to be twice as likely to become entrepreneurs as U.S. native-born.
  • Entrepreneurs are becoming more diverse, with over 40 percent of new entrepreneurs in the 2015 Index being non-white.

You can download a complete copy of the new Kauffman Index here.

Another important finding in the 2015 Index is that more new entrepreneurs are people who had jobs, but wanted to strike out on their own to explore the world of entrepreneurship. This is called “Opportunity” entrepreneurship.

Those starting a business because they have few alternatives are “Necessity” entrepreneurs, and their numbers are rapidly declining.

 The Future

It’s great to see the turnaround in new business ownership… but what is the long-term prognosis for success of the 6+ Million new businesses that were started during 2014?

The sad truth is that few of them will survive very long. I recommend that you download a copy of my free report titled “Business Survival Reality” from the sidebar. An updated version of this report will be available around mid-June, and if you enter your email in the subscription box I will notify you when the new report is ready.

So, there you have some highlights from the 2015 “Kauffman Index: Startup Activity.” Please leave your comments and thoughts below—we’re talking here about America’s future.

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