ECONOMY SENDS MIXED SIGNALS TO U.S. ENTREPRENEURS ACCORDING TO GLOBAL ENTREPRENEURSHIP MONITOR (GEM) RESEARCH
The data on entrepreneurial activity presents a mixed picture in the United States according to the Global Entrepreneurship Monitor (GEM) 2010 National Entrepreneurial Assessment for the USA, conducted by Babson College and Baruch College.
"The picture of entrepreneurial activity in the U.S. painted by this report continues to exhibit elements of light and dark. While some improvements have occurred, the extent to which the economic downturn affected entrepreneurial activity remains unclear. Many trends in entrepreneurial activity have persisted, particularly the rates of opportunity and necessity entrepreneurship. These trends merit further examination, as they are likely to affect the economic wealth of the country,” said GEM researchers.
Early Stage Entrepreneurs
Total early-stage entrepreneurial prevalence rate showed a small decline from 8.0% in 2009 to 7.7% in 2010. Yet early-stage entrepreneurs are positive thinkers -- 23.3% expect to create more than 10 jobs with 50% growth over the next 5 years. New value in social ventures -- start-up entrepreneurs are increasingly focused on both social and economic goals suggesting a growing commitment to social entrepreneurship strengthened with a realistic commitment to an economic model.
Necessity-driven entrepreneurship increased while rates of opportunity-driven ventures dropped significantly. U.S. entrepreneurial activity remains healthy compared to the rest of the world. Yet the dramatic increase in necessity-driven ventures (25%) is troubling because it signals a correlating tumble in high-value opportunity-based businesses.
The gender gap is narrowing due to a slight increase in the activity of women combined with a big drop in the activity of men. Entrepreneurial activity of women increased to 5.6% up from 5.0% in 2009, while men dropped from 8.8% in 2009 to 6.7% in 2010. Though women continue to focus on consumer services (53% of their start-ups), they describe their businesses as medium- to high- technology ventures more often than is claimed by men (women 11%, men 9.4%).
Entrepreneurs are graying -- 7.9% of entrepreneurs involved in early-stage are over the age of 65 and 18% are over the age of 55. GEM also found older entrepreneurs have a high-level of educational experience.
Non-Caucasians saw overall activity increase (from 12.8% to 18.1%), a rise in necessity-driven start-ups, and an even larger increase in work with businesses at least 36 months old (5.4% in 2010, up from 2.1%).The only similarity between Caucasians and Non-Caucasians was a decrease in rates of opportunity-driven entrepreneurship.
U.S. is still the innovation leader -- opportunity-driven entrepreneurs (31.9%) are more innovative than necessity-driven entrepreneurs (23.3%). 2010 saw a significant increase in innovation within the technology sector -- over 10% of early-stage entrepreneurs were active in technology compared to just 1.7% in 2009. More U.S. entrepreneurs are closing down their businesses. Their discontinuation rate was second highest among innovation-driven countries raising concerns about a possible trend that is gaining momentum. Another cause for concern: the U.S. rate of early-stage start-ups, when compared to innovation-driven economies around the world, was markedly lower than in the past. Historically, the U.S. has been the global leader in taking a start-up to the next level.
A bright spot? An almost 2% increase in established businesses - up from 5.9% in 2009 to 7.7% in 2010. Attitudes among both early-stage and established business entrepreneurs improved when asked if starting a business in the U.S. in 2010 was harder than a year ago.
Funding falls -- The decline in the availability of sufficient funding from key funding sources continued in 2010 and reached the lowest level for the five-year period (2006-2010). GEM’s national experts’ perceptions about the presence of good opportunities to create new firms declined below that of 2008, and the U.S. dynamism rate (ratio of early-stage entrepreneurs to established businesses) also plummeted. Older entrepreneurs have money in their pockets -- most start-ups were launched by those who earned between $50,000 and $75,000 annually.
Midwest saw the greatest rebound -- most affected in 2009, the Midwest experienced a substantial rebound as prevalence rates rose from 13.0% to 15.2% in 2010. View the report here.