New business owners have more company than ever before, according to the 2015 Kauffman Index, a detailed analysis of entrepreneurial trends compiled by the Kauffman Foundation. After a five-year downward trend, startups rose in 2015 by about 10 percent—the largest year-over-year increase in the past 20 years. The 2015 index shows that 310 of every 100,000 adults started a new business each month, up from an average of 280 in 2014.
Although Kauffman considers the increase “tepid” compared to historical norms, it indicates a rebound in entrepreneurial activity. Thirty two U.S. states posted higher startup activity this year compared to 2014, and not necessarily where you might think. Montana, Wyoming, North Dakota, Colorado, and Vermont had the highest level of activity, with an entrepreneur rate (percentage of entrepreneurs starting businesses per month for every 100,000 adults) that ranged from .40 percent to .54 percent. “The high level of startup activity in these states is likely associated with the very high real GDP growth most of these states have recently experienced,” the report said.
California, home to tech startup epicenter Silicon Valley and new business leaders San Diego and Los Angeles, nonetheless fell nine points to rank number 14 on the state rankings. The Golden State showed a .39 percent rate of entrepreneurs.
Texas ranked number 19, despite benefiting from startup havens such as Austin, Houston, and San Antonio. Washington, with its thriving information and communications technology sector, fell six points to number 38. Nevada, however, rose eleven places to hit the top 10, with an entrepreneur rate of .37 percent. Ranked the second most entrepreneur-friendly state by the Small Business & Entrepreneurship Council’s “Small Business Policy Index 2014,” Nevada offers a wealth of resources for entrepreneurs and imposes no income taxes.
In addition to entrepreneur rate and startup density, the Kauffman Index also measured opportunity share, which indicates how many entrepreneurs started their business while unemployed. Unemployment indicates entrepreneurship out of necessity rather than opportunity. In Alabama, number 49 on the list, three out of every ten new entrepreneurs were previously unemployed, while in Idaho, number eight on the state rankings list, only one in 10 new business owners came from unemployment. In the U.S. overall, roughly eight out of every 10 entrepreneurs started their business because they saw market opportunity.
The Kauffman Index bases its findings on nationally representative sample sizes of more than a half million observations each year. It also analyzes administrative data that covers the spectrum of employer business entities. The study takes an industry-agnostic perspective, looking beyond specific industries to new business in general.
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