2019 Early-Stage Entrepreneurship in the United States

Summary of Study

Bottom line: The KESE Index, which aggregates a series of four entrepreneurship indicators, remained constant in 2019 at 1.2. This score represents more than one standard deviation above the index's normalized value, and is one of the highest level ever recorded over the past 24 years. The score was driven by high entrepreneurship rates among immigrants and Latinos. 

The overall KESE Index of 1.2 is derived from the equally-weighted inputs of the following four variables:

1) Rate of new entrepreneurs: the broadest measure possible for business creation by population.
2) Opportunity share of new entrepreneurs: the percentage of new entrepreneurs who created a business out of choice instead of necessity.
3) Startup early job creation: the number of jobs created in the first year of business per capita.
4) Startup early survival rate: the rate of survival in the first year of business.

Rate of New Entrepreneurs
Nationally, the rate of new entrepreneurs in 2019 was 0.31 percent, meaning that an average of 310 out of every 100,000 adults became new entrepreneurs in a given month. This score represents a slight decline from 0.32 percent in the previous year. The rate of new entrepreneurs was 0.23 percent among women and 0.38 percent among men, reflecting a slight decline for men and an essentially no change for women from the previous year.  The entrepreneurship rate was the highest among Latinos at 0.44 percent, roughly 50 percent higher than other races. The entrepreneurship rate among immigrants was also 0.44 percent, more than 50 percent higher than the native-born population.

Opportunity Share of New Entrepreneurs
The opportunity share of new entrepreneurs, which is the portion of entrepreneurs that chose entrepreneurship by choice, not necessity, was 86.9 percent in 2019. This score represents a slight increase from 86.2 percent in the previous year. The opportunity share of new entrepreneurs increased for women and remained roughly constant for men. African Americans and Asians experienced increases in the opportunity share of new entrepreneurs in 2019, continuing upward trends over the past few years. The opportunity share of new entrepreneurs increased for immigrants and nearly all age groups in 2019, continuing upward trends since the Great Recession.

National Startup Early Job Creation
The national startup early job creation, was 5.2 in 2019, meaning that the average startup that hired would hire a little over 5 jobs for every 1,000 people. This job creation by new startups is the same as in the previous year, but it represents a substantially lower level than prior to the Great Recession and especially during the 1990s. In the 1990s, national startup early job creation was about 50 percent higher than it is today. Furthermore, the past few years have not experienced an increase, raising concerns about a plateau. 

Startup Early Survival Rate
Startup early survival rate was 79.6 percent in 2019, meaning that almost eight in 10 startups survived the first year. This score is relatively unchanged from the previous year. It has increased from 75.3 percent in 2009. Since 2012, the startup early survival rate has remained relatively constant at between 79.2 percent to 79.7 percent. Survival rates generally show a pro-cyclical pattern. This indicator is a measure of immediate survival; it does not reflect the long-term survival of startups. 

Read the full study here

Feature Charticle

Kauffman Early-Stage Entrepreneurship (KESE) Index (1996-2019)

Kauffman Foundation

Findings:

  • The KESE Index, which aggregates a series of four entrepreneurship indicators, remained constant in 2019 at 1.2.
  • This score represents more than one standard deviation above the index's normalized value, and is one of the highest level ever recorded over the past 24 years.
  • The score was driven by high entrepreneurship scores among immigrants and Latinos as well as an increase in the share of entrepreneurs pursuing entrepreneurship based on opportunity, not necessity.


Read the full study here