Startup Activity Gains Momentum in Most States and Metros, According to Latest Kauffman Startup Index

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The majority of U.S. states and largest metropolitan areas experienced an increase in new business creation Interactive data of entrepreneurial indicators since 1996 are available at http://www.kauffmanindex.org

These reports are critical to solving the puzzle of why entrepreneurship thrives in some places and not in others,” said Victor Hwang, vice president of Entrepreneurship at the Kauffman Foundation.

A majority of U.S. states and metro areas are experiencing higher rates of new business creation, following the national trend, according to 2016 Kauffman Index of Startup Activity State and Metro Trends data released today by the Ewing Marion Kauffman Foundation.

Thirty states saw higher aggregate levels of new business activity compared with the previous year. Smaller states felt more headwind in the most recent year, when 11 of them saw a contraction in new business creation. By comparison, only five larger states experienced year-over-year contraction.

Twenty-three out of the largest 40 metro areas experienced an increase in startup activity.

“These reports are critical to solving the puzzle of why entrepreneurship thrives in some places and not in others,” said Victor Hwang, vice president of Entrepreneurship at the Kauffman Foundation. “Policymakers, practitioners and entrepreneur support organizations can use the findings as tools to take the pulse of their local ecosystems to strengthen startup activity.”

“With the Kauffman Index of Startup Activity, the Kauffman Foundation provides the essential data and research that allow us to keep that pulse and leverage the insights we learn from the data to create a better future for our communities,” wrote Colo. Governor John Hickenlooper in the reports’ foreword. “All entrepreneurship is local. And the policymakers, entrepreneurship supporters and communities that overlook this reality do so at their own peril.”

“The startup numbers for states and metro areas dovetail with the national Startup Activity Index report, which showed entrepreneurship recovering from the Great Recession slump,” said Arnobio Morelix, senior research analyst at the Kauffman Foundation. “While there is considerable variation from one locale to the next, the aggregate data bodes well for business startup activity around the country.”

As the Kauffman Foundation previously reported, national startup activity rose in the 2016 Index, continuing an upward trend started in 2015. After falling with the Great Recession and reaching its lowest point in the past two decades just two years ago, startup activity rebounded in 2016 to its fifth-highest level ever.

The Kauffman Index of Startup Activity relies on three indicators to look at new business creation:

  • The Rate of New Entrepreneurs in a location, calculated as the percentage of adults becoming entrepreneurs in a given month.
  • The Opportunity Share of New Entrepreneurs, calculated as the percentage of new entrepreneurs driven primarily by opportunity vs. necessity.
  • Startup Density, the number of new employer businesses normalized by population. More specifically, the Startup Density is the ratio of the number of new employer businesses divided by the total population of existing employer businesses.

For more highlights about state and top 40 metro area findings, visit here. Follow the conversation on Twitter at #StartupActivity.

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About the Kauffman Index of Startup Activity

The Kauffman Index of Startup Activity is a measure of broad range startup activity across the United States and is an early indicator of new business creation. Rather than focusing on inputs, the Kauffman Index focuses primarily on entrepreneurial outputs – the actual results of entrepreneurial activity, such as new companies, business density and growth rates. The data presented in the Startup Index draws from a nationally representative sample size of more than half a million adults each year, and the universe of all employer businesses in the United States – covering approximately 5 million companies. The Startup Index is a unique measure of entrepreneurship because it is more timely and dynamic, excludes “casual” businesses and includes all types of business activity, regardless of industry.

About the Kauffman Foundation

The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that aims to foster economic independence by advancing educational achievement and entrepreneurial success. Founded by late entrepreneur and philanthropist Ewing Marion Kauffman, the Foundation is based in Kansas City, Missouri, and has approximately $2 billion in assets. For more information, visit http://www.kauffman.org, and follow the Foundation on http://www.twitter.com/kauffmanfdn and http://www.facebook.com/kauffmanfdn.

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