More Power To You

American Way

Entrepreneurship soars from coast to coast

Entrepreneurship is a more integral part of American life than we even imagined. According to a recent pilot study by the Entrepreneurial Research Consortium (ERC), about 35 million households--more than 37 percent of the U.S. total--include at least one person who is either running a small business, has invested in a small business, is trying to start a small business, has run a small business, or has tried in the past to start a business.

"The finding that more than one-third of all [U.S.] households have at least one person who is involved in the world of new and small business, that's a surprise," says Paul Reynolds, ERC coordinator and a professor of entrepreneurial studies at Babson College in Wellesley, Massachusetts.

Of these 35 million U.S. households, about 18 million include someone currently running a business, 6.8 million include someone trying to start a business, about 2.6 million include someone privately investing in a small business, and the rest include someone who once started or attempted to start a business.

The prevalence of "business angels," or private investors, was another major surprise in the ERC's study. "If you count the money coming from venture capital firms, the Small Business Administration and banks, that's probably only 50 percent [of business capitalization]," says Reynolds. "So the other 50 percent may be coming from these informal arrangements. If you're talking about $5,000 to $10,000 from 2 million households, that's $10 billion or $20 billion. And that may be the key to how people are capitalizing their business start-ups."

Reynolds adds that the link between the households and entrepreneurship was at about twice the level he expected. And even that number is conservative. Reynolds points out that the study counted only one individual involved in each activity, even though about 10 percent of the households reported multiple occurrences of each activity.

Considering the implications, "I think it's criminal that the government doesn't have better information on this issue," says Reynolds. "I mean, look at the basics here--one-third of our households have someone involved in [small business] in some fashion, and about 4 to 6 percent of the adults in their prime working years are trying to start a business. We already know new and small businesses are one of the major sources of job growth, and yet our government does not know how many new businesses are being started every year. That's the bottom line."

Reynolds expects the ERC, a consortium of universities and research groups, will find even more groundbreaking conclusions in its second pilot study, which will delve deeper into issues such as the number of start-up efforts required to get one business in place, or how much education and training entrepreneurs have. "We hope when the initial work is done in the scholarly academic sector and when it proves its value for policy purposes," he says, "the federal government will pick up the ball."

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This article was originally published in the March 1997 print edition of Entrepreneur with the headline: More Power To You.

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