The Remarkable Geographic Diversity of Growth
Last month, the Kauffman Foundation released the first-ever Kauffman Index of Growth Entrepreneurship. Nationally, the 2016 Growth Entrepreneurship Index rose for the third year in a row, showing that startups are growing faster in their first five years than in the years before and more companies are reaching the scale of medium-sized or larger by employing 50 plus employees.
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While the 200-plus pages of the three reports cover a lot of ground, there are six specific findings from them I would like to highlight here. You can find the below.
1) The remarkable geographic diversity in growth entrepreneurship.
As shown on the map, we see metros with high-performance in entrepreneurial growth touching cities on both coasts, the South, and Midwest. Expected hubs such as Washington D.C., Boston, and San Francisco are doing well. Yet, the Kauffman Index also shows the rise of some metros not typically noted such as Nashville, Tennessee; and Columbus, Ohio.
2) The top 10 metros with highest Growth Entrepreneurship Activity
The top ten metros with the highest levels of Growth Entrepreneurship in the Kauffman Index were:
1. Washington, D.C.
2. Austin, TX
3. San Jose, CA
4. Columbus, OH
5. Nashville, TN
6. Boston, MA
7. San Diego, CA
8. San Francisco, CA
9. San Antonio, TX
10. Dallas, TX
3) San Jose, California, has the highest rate of early startup traction
San Jose, California, has experienced the highest Rate of Startup Growth in the country. San Jose’s startup cohort born five years ago went from 5.2 employees on average at the year of birth to 11.8 employees on average for surviving firms at their fifth year of operation, which is a 128.1 percent growth.
4) Metro Trends in Share of Scale-ups
In Columbus, Ohio, out of every 1,000 firms that are 10 years and younger, 27 companies started small and reached a scale of more than 50 employees in their first 10 years of operation. Whereas in Detroit, Michigan, and Miami, Florida, only nine companies reached a scale of more than 50 employees in 10 years. Thirty-six of the 40 metros studied had a higher scale up share than the U.S. national average of 1.1 percent.
5) Metro Trends in High-Growth Company Density
In the Washington, D.C., metro, out of every 100,000 employer businesses, 271 companies achieved at least 20 percent annualized growth over a three-year period with a $2 million annual revenue. In the Sacramento, California, metro, only 40 companies out of 100,000 employer businesses achieved high growth.
6) Industry Trends for High-Growth Companies
The top five industries by share of high-growth companies in 2015 as released by Kauffman’s Growth Entrepreneurship Index are IT services, advertising and marketing, business products and services, health, and software. The Kauffman Index has presented the top metro locations with the highest density of high-growth companies for each of these industries.
Washington D.C., has the highest density of high-growth companies in the IT Industry with 59 high growth IT companies. Columbus has the highest density in advertising and marketing. Nashville has the highest density for two of the top five high growth industries: business products and services and health. Last but not least, San Jose has the highest concentration of high growth software companies.