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Four Indicators for a Vibrant Entrepreneurship Ecosystem

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Presentation on measuring entrepreneurship ecosystems at the Global Entrepreneurship Congress in Medellin, Colombia.

March 2016

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Four Indicators for a Vibrant Entrepreneurship Ecosystem

  1. 1. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Arnobio Morelix Senior Research Analyst, Kauffman Foundation MEASURING ENTREPRENEURSHIP ECOSYSTEMS FOR BETTER INTERVENTIONS
  2. 2. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Acknowledgments – Research & Policy • Alicia Robb • Amisha Miller • Chris Jackson • Dane Stangler • EJ Reedy • Emily Fetsch • Jason Wiens • Jordan Bell-Masterson • Josh Russell • Rob Fairlie • Yas Motoyama
  3. 3. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Four Takeaways 1. A tentative framework for making sense of the complexity of entrepreneurship 2. Applications of this framework in private and public world 3. Ingredients and recipes for a vibrant entrepreneurial ecosystem 4. Data + resources to get started
  4. 4. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Entrepreneurship has many moving parts
  5. 5. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Entrepreneurship many moving parts • Starting a business ≠ running a small business ≠ growing a business – Different processes, different challenges • We all know this. But we all of often talk about entrepreneurship as only one thing • Challenges on – Measurement (what are we actually measuring?) – Targeting policy and intervention (what kind of activity do we care about?) – Stakeholders focus on different things (e.g., accelerator, v. small business authority, v. tech initiatives)
  6. 6. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O 1) Framework for measuring ecosystems and making sense of the complexity – version 1.0 Startup Local Small Business Growth
  7. 7. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O 3 Distinct Aspects of Entrepreneurship • Startup Activity – New business creation • Small Businesses (“Main Street”) – Local, small, business activity • Growth Entrepreneurship – High-growth and growing companies • Goals – economic indicators (e.g., inflation rate, unemployment rate) – Measured “output” indicators in the U.S. at national, state (50 states), and city level (40 largest metros)
  8. 8. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Startup Activity • Rate of New Entrepreneurs – % adults starting new business (incorporated or unincorporated, employer or not) • Opportunity Share of New Entrepreneurs – % of opportunity-driven new entrepreneurs (proxy – not previously unemployed) • Startup Density – New (Age 0) employer firms by pop
  9. 9. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Main Street Entrepreneurship • Rate of Business Owners – % of adults who own a business, with our without employees, incorporated or not • Established Small Business Density – Local, established (5+ years of age) small (<50 employees) business • Survival Rates – % of firms becoming established (5+ years) • to be added next edition
  10. 10. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Growth Entrepreneurship • Startup Growth Rate – Average growth 5y after founding of all surviving firms, employment • Share of Scale Ups – Firms that become medium or larger (50+ employees) by 5y after founding • High-Growth Business Density – Firms with 20% growth over 3y per pop To be released next month
  11. 11. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O What it looks like
  12. 12. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O 2) Practice and Policy Applications In the last year, since we moved one indicator (Kauffman Index of Entrepreneurial Activity) to more nuance and more local data • Local government, entrepreneurship support organizations, economic development agencies – Benchmark not only against other areas, but your own area in the past • Federal government agencies, Senate, Congress, state government and governors – Business owners demographics • Business intelligence – Intuit, Staples, Square (IPO) • Popular discourse/media – E.g., New York Times, Wall Street Journal, The Economist, Bloomberg, USA Today, CNBC, etc. • Discussing targeted policy – Policy Map, by Jason Wiens
  13. 13. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Entrepreneurship Policy Map introduced this weekend at South by Southwest interactive
  14. 14. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O 3) Measuring Your Entrepreneurial Ecosystem – a look at Ingredients • Density • Fluidity • Connectivity • Diversity
  15. 15. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Entrepreneurial Density • Number of new & young companies: by population • Employment share of young companies • High-tech startup density
  16. 16. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Entrepreneurial Fluidity • Population “flux” – Inflow and outflow of people – Brain Circulation more relevant than Brain Drain • With people with the un-matched skills are staying, that is bad for them and for your ecosystem • Labor market velocity – Movement (“reallocation”) between jobs and companies • High-growth firm presence
  17. 17. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Entrepreneurial Connectivity • Program mapping • Spinoff rate • “Dealmaker” network
  18. 18. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Entrepreneurial Diversity • Number of “specializations” • Social and economic (income) mobility • Outsiders
  19. 19. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O 4) Data + Resources • For data sources – To be posted at www.growthology.org • For blank policy map and ideas – www.kauffman.org/policymap
  20. 20. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Challenges • “More entrepreneurship is better” assumption – “more is better” (especially young and growing) is an useful heuristics, but at least conceptually not always true • Data lags – Nowcasting? • Inside city (e.g., street level) missing
  21. 21. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O What are we missing? • What’s missing on the framework? • Which ingredients connect to which “output” indicators? • How to get more granular (e.g., interventions that affect ingredients?) • What are you doing in your region?
  22. 22. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O Thank you Four Takeaways 1. Framework for making sense of complexity 2. Public and private applications 3. Ingredients for a vibrate ecosystem 4. Data and policy discussion resources • Arnobio Morelix – @arnobiomorelix (Twitter) – amorelix@kauffman.org – www.growthology.org (entrepreneurship research blog) – www.kauffmanindex.org
  23. 23. # G E C 2 0 1 6 | @ G E C G L O B A L | G E C . C O #GEC2016 @GECGLOBAL GEC.CO

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