A growing percentage of U.S. citizens engage in entrepreneurship.
Babson and Baruch Colleges issued a report last week that points to an exciting trend in the U.S. economy: The percentage of adults involved in startups in 2012 hit 13%–a record high since Babson began tracking entrepreneurship rates in 1999.
Better yet, the vast majority of these folks started businesses to pursue opportunity, rather than out of necessity. A whopping 43 percent of Americans believe there are good opportunities for entrepreneurship, up by more than 20 percent since 2011 and the highest level recorded in the history of the study, called the Global Entrepreneurship Monitor U.S. report.
“Despite a sluggish economy, 2012 was marked by U.S. entrepreneurs reporting greater optimism and confidence in their abilities to start new businesses,” lead author, Donna J. Kelley, Associate Professor of Entrepreneurship at Babson College, explained in a press release on the findings.
I’m wondering if, after the long recession, more Americans are coming to the conclusion that I did, when I started my own business in 2007: The old rules, in which getting traditional job was the smartest career route for many, don’t apply as much anymore. I was very interested to see that in four out of the five years between 2008 and 2012, 56% of adults said they had the ability to start a business–a confidence level higher than in many innovation-driven economies.
Even after the global financial meltdown, there’s still tremendous opportunity, freedom and creative potential in starting a business that can’t be found any other way–and the U.S. is still a great place to do it.
There’s some bad news in the report. Among those found to be shuttering businesses in the U.S., the percentage who attributed it to difficulties in finding financing was much higher than that of other innovation-driven economies. More than 18% of U.S. entrepreneurs closing businesses cited this reason, vs. 11% in other comparable economies.
Only 16% of funding in the study came from banks, while 82% was from the entrepreneurs’ own savings or from friends and family. The study found that typically, entrepreneurs needed a median level of $15,000 in startup cash to get going. With the credit climate thawing a bit and new forms of financing like crowdfunding taking hold, perhaps this won’t be as big an issue in years to come.
Some other findings worth noting:
* Home based businesses are hot: 69 percent of new businesses in the U.S. start at home, and 59 percent of established businesses are home based.
* People of all generations are taking a chance on their own businesses: About 15 to 20% of the workforce–regardless of age– is engaged in running a startup or a more established business, once labor-force participation rates for each generation are factored in.
* Immigrants are a major force on the entrepreneurial scene: More than 16% of first generation immigrants started or ran startups in 2012, higher than the 13% participation rate for Americans who aren’t immigrants.
* Women are still diving into entrepreneurship, but have behind men a bit: For every 10 men involved in entrepreneurship, there are seven women. This number dipped from eight women for every 10 men in 2011. One contributing factor was that men’s rate of new business creation increased, while women’s held steady.
* We’ve yet to tap the potential of global markets: While the digital revolution has made it possible to reach customers overseas, only 12% of U.S. entrepreneurs said more than 25% of their clientele is based abroad.
While there’s definitely room for improvement in areas like exporting, this report is full of good news overall. If you’re looking for reasons to feel good about the American economy, it’s worth checking out.
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