Kauffman Foundation: 2018 National Report on Early-Stage Entrepreneurship

Summary of Study

Bottom Line: The Kauffman Indicators of Early-Stage Entrepreneurship (KESE) offers a guidepost for a broad picture of early-stage entrepreneurship by tracking changes in entrepreneurial activity over time at the national level. The KESE Index declined slightly to 0.56 in 2018, down from 0.62 in 2017, yet it still reflects one of the highest entrepreneurial levels on record.  The KESE is a summary index that is made up of four factors: the rate of new entrepreneurs, the opportunity share of entrepreneurship, startup early job creation, and startup early survival rate.

The purpose of entrepreneurship indicators is to provide a picture of early-stage entrepreneurial activity. The indicators track changes in entrepreneurial activity over time, across geographies, and among various demographic groups. Entrepreneurial indicators help people better understand trends in different dimensions of entrepreneurial activity.

In addition to the overall KESE Index, the following component entrepreneurship indicators should also be considered:

  • The rate of new entrepreneurs in 2018 was 0.32 percent, which reflects that 320 out of every 100,000 adults became new entrepreneurs in an average month, little changed from 2017, continuing an upward trend over the past several years. 

  • The opportunity share of new entrepreneurs, representing the percentage of new entrepreneurs who created businesses out of opportunity instead of necessity, was 86.16 percent in 2018 -- up slightly from 2017, when it was 84.37 percent.

  • The startup early job creation indicator was 5.20 jobs per 1,000 people in 2018, essentially unchanged from 2017, but far lower than in previous decades. The indicator peaked at 7.87 in 1997, and has since declined by almost a third.

  • The startup early survival rate indicator was 79.43 percent in 2018, essentially unchanged from 2017. This indicator hit a low point of 75.25 percent in 2009 during the Great Recession. 

  • The rate of new entrepreneurs was 0.24 percent among women and 0.41 percent among men in 2018, a significant decrease among women, and a slight increase among men.

  • The rate of new entrepreneurs in 2018 was similar among whites (0.30 percent), African Americans (0.24 percent), and Asians (0.33 percent), and it was much higher for Latinos (0.51 percent).

         — The biggest decrease in 2018 was among African Americans, as their entrepreneurship rate fell by 20 percent from 2017, when it was 0.30 percent.

         — When compared to 1996, rates of entrepreneurship have increased dramatically among Latinos, rising from 10 percent to 25 percent of all new entrepreneurs. The rate of new entrepreneurs among whites has declined over that same timeframe from 77.1 percent to 54.4 percent. 

  • The rate of new entrepreneurs was 0.53 percent for immigrants in 2018, which means they are twice as likely to start businesses as native-born Americans (0.27 percent). Both groups started businesses at slightly lower rates than they did in 2017. 

         — Immigrants now comprise nearly 30 percent of all new entrepreneurs, a substantial increase from 1996, when 13.3 percent of new entrepreneurs were immigrants.

  • The rate of new entrepreneurs was highest among Americans aged 45–54 (0.38 percent) and 55–64 (0.37 percent), and lowest among Americans aged 20–34 (0.23 percent). The rate of new entrepreneurs declined slightly in 2018 among all age groups except for the aged 35–44 group.

Read the full study HERE.  

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Kauffman Early-Stage Entrepreneurship (KESE) Index (1996 - 2018)

Kauffman Foundation

Findings:

  • The Kauffman Early-Stage Entrepreneurship (KESE) Index declined slightly to 0.56 in 2018, down from 0.62 in 2017, yet it still reflects one of the highest entrepreneurial levels on record. 

  • The KESE Index is made up of four factors: the rate of new entrepreneurs, the opportunity share of entrepreneurship, startup early job creation, and startup early survival rate.

    • The rate of new entrepreneurs in 2018 was 0.32 percent, little changed from 2017. 

    • The opportunity share of new entrepreneurs was 86.16 percent in 2018 -- up slightly from 2017.

    • The startup early job creation indicator was 5.20 jobs per 1,000 people in 2018, essentially unchanged from 2017.

    • The startup early survival rate indicator was 79.43 percent in 2018, essentially unchanged from 2017.

Read the full study HERE.