10 Facts That Will Change How You Think About Opportunity and Entrepreneurship
Who is turning to entrepreneurship and where they are launching their businesses may surprise you.
When you hear the words startup founder, it’s likely that the image that comes to mind is that of a young, white man who lives in California or New York, favors casual wear and didn't finish college. New data from the Kauffman Foundation may have you thinking differently.
Every year, Kauffman releases a wide ranging body of research about the state of startup activity in the United States. The study looks at trends across cities and states and explores who -- by age, gender, race and even veteran status -- chooses to be an entrepreneur.
Read on for 10 facts about what entrepreneurship looks like now.
Startup activity is on the rise but the rate has declined.Three years ago, startup activity hit its lowest point in 20 years, but in 2016, startup activity across the country saw a further increase from 2014 and 2015. It's a step in the right direction given how significantly startup activity dipped during the Great Recession. However, the rate of new entrepreneurs dropped slightly from 0.33 percent in 2015 to 0.31 percent in 2016.
People are choosing entrepreneurship for opportunity, not necessity.One of the metrics the study looks at is the opportunity share of new entrepreneurs -- the proportion of new entrepreneurs who are prompted to start businesses because of an opportunity, not because they lack other options. About 86 percent of entrepreneurs chose this route because of an opportunity in 2016, up 12 percentage points from 2009.
There are more boomer entrepreneurs than millennials.
The data found that 75 percent of entrepreneurs are actually older than 34. The cohort of entrepreneurs aged 20 to 34 is on the decline. This group made up 34.3 percent of all new entrepreneurs in 1996, but in 2016 made up 24.4 percent of new entrepreneurs. Meanwhile, entrepreneurs ages 55 to 64 made up 14.83 percent of new entrepreneurs in 1996 and 25.5 percent in 2016.
They are college graduates, not dropouts.While some might subscribe to the Bill Gates, Mark Zuckerberg and Evan Spiegel school of leaving your institution of higher education to start a business, according to the Kauffman Foundation, the percentage of entrepreneurs with college degrees grew since 1996 from 23.7 percent to 30.1 percent, making business owners with college degrees the biggest educational category of new entrepreneurs in the country.
Female entrepreneurs have made gains, but there is still a long way to go.
In 2016, the rate of new male entrepreneurs was 0.39 percent (390 out of 100,000) and for women it was 0.23 percent (230 out of 100,000). However, for women, that rate has never gone above 0.26 percent -- it reached that level in 1996 and 2015. But in 2014, that figure for women was below 0.22 percent.
Progress has been incrementally made within the last couple of years even with the dip in 2016, but as ever, men are more likely to start businesses than women. In 1996, 56.33 percent of entrepreneurs were men and 43.67 percent were women. In 2016. 60.51 percent were men and only 39.49 percent were women.
Entrepreneurs are less likely to be white.
Of course, the majority of startup founders are white and have been for the last two decades, but incrementally, black, Asian and Latino entrepreneurs have made gains since 1996.
Twenty years ago, 77.12 percent of new entrepreneurs were white, while in 2016 that figure dropped to 55.59 percent. From 1996 to 2016, the percentage of black entrepreneurs increased from 8.43 percent to 9.24 percent. Asian entrepreneurship went from 3.42 percent to 7.59 percent. Latino entrepreneurship went from 10 percent to 24.12 percent.
Entrepreneurs in America are more likely to be foreign born.Overwhelmingly, entrepreneurs in the United States are native born, but that is changing. Twenty years ago, 86.71 percent of new entrepreneurs were native born while in 2016 that figure was 70.50 percent. In 1996, 13.29 percent of new entrepreneurs were immigrants and in 2016, that number had jumped to 29.5 percent.
Entrepreneurs are less likely to be veterans.In 1996, 12.49 percent of new entrepreneurs were veterans, but in 2016, that number had decreased to 4.16 percent. According to the Kauffman Foundation, that decline is due to the fact that over the past 20 years there has been a declining share of people with veteran status in the country’s working age population.
It seems like there is a startup frenzy, but that isn’t the case.
One of the metrics that the Kauffman Foundation uses to assess the state of entrepreneurship in the country is something called startup density. Kauffman defines it as “the number of startups per 1,000 employer businesses.” From 2015 to 2016, that figure went up from 81.6 startups per 1,000 employer businesses to 85.4. Even though there was an upward trend, overall, that figure is on the decline.From 2006 to 2014, startup density in the top 40 of the biggest metropolitan areas decreased on average by more than 20 percent. And overall startup density today is about 20 percent lower than it was before the Great Recession and has been on a long-term decline since the late 1970s.
The places with the most startup activity may surprise you.
Of the 25 largest states, California was number one for startup activity, followed by Texas, Florida, Arizona and Colorado. For the 25 smallest states, Nevada, Oklahoma, Wyoming, Montana and Idaho were at the top of the heap.
The biggest cities for startup activity were surprising as well. The top five were Miami; Austin, Texas; Los Angeles; San Diego, Calif.; and Las Vegas. The cities that have seen the biggest jump from last year were St. Louis, Cleveland and San Antonio, Texas. So clearly, you don’t just have to go to San Francisco or New York City to find a community of thriving entrepreneurs.