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© 2013 Ewing Marion Kauffman Foundation
www.kauffman.org
© 2013 Ewing Marion Kauffman Foundation
Startup Activity in America
Jason Wiens & Arnobio Morelix
Ewing Marion Kauffman Foundation
August 31, 2016
© 2013 Ewing Marion Kauffman Foundation
Young Firms Create the Most Jobs
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NetJobCreation
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Age 0-5 Age 6-10 Age 11+
© 2013 Ewing Marion Kauffman Foundation
Startups Create Jobs and…
Spur innovation, and
Provide paths to upward economic mobility, and
Make the U.S. economy dynamic.
© 2013 Ewing Marion Kauffman Foundation
Understanding the Kauffman Index of
Entrepreneurship Series
• Go-to set of indicators
o “Jobs Report” for unemployment rate and labor market health
o Consumer Price Index for inflation rate and changes in prices
• Kauffman Index: set indicators to measure all things
entrepreneurship
© 2013 Ewing Marion Kauffman Foundation
3 Distinct Aspects of Entrepreneurship
© 2013 Ewing Marion Kauffman Foundation
Kauffman Index of Startup Activity
© 2013 Ewing Marion Kauffman Foundation
4 Takeaways from the Kauffman Index of
Startup Activity
• Startup Activity is on the Rise
o Increased for the second year in a row after reaching its lowest level in the past
two decades only two years ago
o Increase in 23 out of 40 largest metros and in 30 of the 50 states
o 889,000 jobs created by new establishments in the last quarter of 2015 alone
• highest job creation number by new establishments since early 2008
• 4 Takeaways
o 1) New Face of the American Entrepreneur
o 2) Return of Opportunity Entrepreneurship
o 3) Geography of Startup Activity
o 4) Startup Great Recession Hangover and Long-Term Decline
© 2013 Ewing Marion Kauffman Foundation
1) New Face of the American Entrepreneur
• Narrowing Startup Gender Gap
o Rate of new entrepreneurs for women is the highest since 1996
o Startup gender gap is still wide, it has narrowed in the latest year
• from 0.22% in 2014 to 0.26 in 2015 for females
• 0.42% for males
• Increasing Racial Diversity Among New Entrepreneurs
o New entrepreneurs from racial minority backgrounds (e.g., Asian, Black, Latino,
Native-American)
• 1996: 23% (2 in 10 new entrepreneurs)
• 2015: 40% (4 in 10)
© 2013 Ewing Marion Kauffman Foundation
2) Return of Opportunity Entrepreneurship
• In 2015, the share of opportunity entrepreneurs was 84
percent – 10 percent points higher than it was in 2011 in
the aftermath of the Great Recession
© 2013 Ewing Marion Kauffman Foundation
3) Geography of Startup Activity
Metro Areas
• Highest Startup Activity – 2016
Rankings
1. Austin
2. Miami
3. Los Angeles
4. San Francisco
5. Las Vegas
• Biggest positive shift in ranks
from 2015 to 2016 were:
1. Orlando (33 to 21)
2. Kansas City (29 to 18)
3. Cincinnati (31 to 24)
4. Nashville (23 to 16)
5. Detroit (35 to 30) and San
Francisco (9 to 4)
© 2013 Ewing Marion Kauffman Foundation
3) Geography of Startup Activity
Larger States
• Highest Startup Activity – 2016
Rankings
1. Texas
2. Florida
3. California
4. New York
5. Colorado
• Biggest positive shift in ranks
from 2015 to 2016 were:
1. New Jersey (18 to 7)
2. Michigan (19 to 11)
3. Minnesota (24 to 21)
© 2013 Ewing Marion Kauffman Foundation
3) Geography of Startup Activity
Smaller States
• Highest Startup Activity – 2016
Rankings
1. Montana
2. Nevada
3. Wyoming
4. Oklahoma
5. Alaska
• Biggest positive shift in ranks
from 2015 to 2016 were:
1. Oregon (22 to 15)
2. Oklahoma (8 to 4)
3. North Dakota (11 to 7)
© 2013 Ewing Marion Kauffman Foundation
4) Startup Great Recession Hangover
• Still below peak preceding Recession drop
o Long Great Recession hangover in startup activity
© 2013 Ewing Marion Kauffman Foundation
Challenge: Fewer Americans Are Starting
Businesses
© 2013 Ewing Marion Kauffman Foundation
Challenge: Death Rates Are Increasing
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Firm Births Firm Deaths
© 2013 Ewing Marion Kauffman Foundation
Good Policy Can Overcome Challenges
1. Welcome Immigrants
2. Reduce and Eliminate Barriers to Entry
3. Develop Human Capital
© 2013 Ewing Marion Kauffman Foundation
Welcome Immigrants
© 2013 Ewing Marion Kauffman Foundation
Reduce and Eliminate Barriers to Entry
Occupational Licensing
• Apply the appropriate protection at minimal burden
Non-Compete Agreements
• Ban
• Narrow the scope
• Disclose earlier
• Educate workers
Opportunity Cost of Trying
• The opportunity cost of trying—not insufficient funds—is a primary
barrier to starting a new business.
© 2013 Ewing Marion Kauffman Foundation
Develop Human Capital
© 2013 Ewing Marion Kauffman Foundation
Consider Kauffman a Resource
Entrepreneurship Policy Digest
www.kauffman.org/policydigest
Kauffman Index of Entrepreneurship Series
www.kauffmanindex.org
Jason Wiens Arnobio Morelix
Policy Director Senior Research Analyst
jwiens@kauffman.org amorelix@kauffman.org

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Startup Activity in America -- A Look at Startup Policy and the Kauffman Index

  • 1. © 2013 Ewing Marion Kauffman Foundation www.kauffman.org © 2013 Ewing Marion Kauffman Foundation Startup Activity in America Jason Wiens & Arnobio Morelix Ewing Marion Kauffman Foundation August 31, 2016
  • 2. © 2013 Ewing Marion Kauffman Foundation Young Firms Create the Most Jobs -3500000 -2500000 -1500000 -500000 500000 1500000 2500000 3500000 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 NetJobCreation Year Net Job Creation by Firm Age Age 0-5 Age 6-10 Age 11+
  • 3. © 2013 Ewing Marion Kauffman Foundation Startups Create Jobs and… Spur innovation, and Provide paths to upward economic mobility, and Make the U.S. economy dynamic.
  • 4. © 2013 Ewing Marion Kauffman Foundation Understanding the Kauffman Index of Entrepreneurship Series • Go-to set of indicators o “Jobs Report” for unemployment rate and labor market health o Consumer Price Index for inflation rate and changes in prices • Kauffman Index: set indicators to measure all things entrepreneurship
  • 5. © 2013 Ewing Marion Kauffman Foundation 3 Distinct Aspects of Entrepreneurship
  • 6. © 2013 Ewing Marion Kauffman Foundation Kauffman Index of Startup Activity
  • 7. © 2013 Ewing Marion Kauffman Foundation 4 Takeaways from the Kauffman Index of Startup Activity • Startup Activity is on the Rise o Increased for the second year in a row after reaching its lowest level in the past two decades only two years ago o Increase in 23 out of 40 largest metros and in 30 of the 50 states o 889,000 jobs created by new establishments in the last quarter of 2015 alone • highest job creation number by new establishments since early 2008 • 4 Takeaways o 1) New Face of the American Entrepreneur o 2) Return of Opportunity Entrepreneurship o 3) Geography of Startup Activity o 4) Startup Great Recession Hangover and Long-Term Decline
  • 8. © 2013 Ewing Marion Kauffman Foundation 1) New Face of the American Entrepreneur • Narrowing Startup Gender Gap o Rate of new entrepreneurs for women is the highest since 1996 o Startup gender gap is still wide, it has narrowed in the latest year • from 0.22% in 2014 to 0.26 in 2015 for females • 0.42% for males • Increasing Racial Diversity Among New Entrepreneurs o New entrepreneurs from racial minority backgrounds (e.g., Asian, Black, Latino, Native-American) • 1996: 23% (2 in 10 new entrepreneurs) • 2015: 40% (4 in 10)
  • 9. © 2013 Ewing Marion Kauffman Foundation 2) Return of Opportunity Entrepreneurship • In 2015, the share of opportunity entrepreneurs was 84 percent – 10 percent points higher than it was in 2011 in the aftermath of the Great Recession
  • 10. © 2013 Ewing Marion Kauffman Foundation 3) Geography of Startup Activity Metro Areas • Highest Startup Activity – 2016 Rankings 1. Austin 2. Miami 3. Los Angeles 4. San Francisco 5. Las Vegas • Biggest positive shift in ranks from 2015 to 2016 were: 1. Orlando (33 to 21) 2. Kansas City (29 to 18) 3. Cincinnati (31 to 24) 4. Nashville (23 to 16) 5. Detroit (35 to 30) and San Francisco (9 to 4)
  • 11. © 2013 Ewing Marion Kauffman Foundation 3) Geography of Startup Activity Larger States • Highest Startup Activity – 2016 Rankings 1. Texas 2. Florida 3. California 4. New York 5. Colorado • Biggest positive shift in ranks from 2015 to 2016 were: 1. New Jersey (18 to 7) 2. Michigan (19 to 11) 3. Minnesota (24 to 21)
  • 12. © 2013 Ewing Marion Kauffman Foundation 3) Geography of Startup Activity Smaller States • Highest Startup Activity – 2016 Rankings 1. Montana 2. Nevada 3. Wyoming 4. Oklahoma 5. Alaska • Biggest positive shift in ranks from 2015 to 2016 were: 1. Oregon (22 to 15) 2. Oklahoma (8 to 4) 3. North Dakota (11 to 7)
  • 13. © 2013 Ewing Marion Kauffman Foundation 4) Startup Great Recession Hangover • Still below peak preceding Recession drop o Long Great Recession hangover in startup activity
  • 14. © 2013 Ewing Marion Kauffman Foundation Challenge: Fewer Americans Are Starting Businesses
  • 15. © 2013 Ewing Marion Kauffman Foundation Challenge: Death Rates Are Increasing 275000 300000 325000 350000 375000 400000 425000 450000 475000 500000 525000 550000 575000 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TotalNumberofU.S.Firms Year Firm Births and Deaths over Time Firm Births Firm Deaths
  • 16. © 2013 Ewing Marion Kauffman Foundation Good Policy Can Overcome Challenges 1. Welcome Immigrants 2. Reduce and Eliminate Barriers to Entry 3. Develop Human Capital
  • 17. © 2013 Ewing Marion Kauffman Foundation Welcome Immigrants
  • 18. © 2013 Ewing Marion Kauffman Foundation Reduce and Eliminate Barriers to Entry Occupational Licensing • Apply the appropriate protection at minimal burden Non-Compete Agreements • Ban • Narrow the scope • Disclose earlier • Educate workers Opportunity Cost of Trying • The opportunity cost of trying—not insufficient funds—is a primary barrier to starting a new business.
  • 19. © 2013 Ewing Marion Kauffman Foundation Develop Human Capital
  • 20. © 2013 Ewing Marion Kauffman Foundation Consider Kauffman a Resource Entrepreneurship Policy Digest www.kauffman.org/policydigest Kauffman Index of Entrepreneurship Series www.kauffmanindex.org Jason Wiens Arnobio Morelix Policy Director Senior Research Analyst jwiens@kauffman.org amorelix@kauffman.org