Entrepreneurs Play Critical Role in the Economy

The nation's leading source for economic research, the Kauffman Foundation, has compiled the most compelling statistics from its data treasure chest to demonstrate the critical role entrepreneurs play in the economy.

From job growth and startup statistics to the impact of immigrants and state standings, the Foundation's most compelling facts and figures are presented below, along with links to the corresponding studies.

Hail to the Job Creators

New firms in the United States have generated about 3 million new jobs every year, but recent cohorts have performed much worse, creating only 2.3 million jobs in 2009.

Starting Smaller; Staying Smaller: America's Slow Leak in Job Creation, July 2011  

More than one-third of job creation is due to the entry of new businesses. 

Turmoil and Growth: Young Businesses, Economic Churning, and Productivity Gains, June 2008  

From 1980-2005, firms less than five years old accounted for all net job growth in the United States. 

Business Dynamics Statistics Briefing: Jobs Created from Business Startups in the United States, January 2009 

The Startup Phenomenon

In 2007, an average of 0.30 percent of adults created a new business each month, equaling about 495,000 new businesses per month. 

Kauffman Index of Entrepreneurial Activity 1996-2007, April 2008  

Nearly half—45 percent—of startups were established in the same state where U.S.-born tech founders received their education. 

Education and Tech Entrepreneurship, May 2008 

What do Microsoft, Disney, Genentech, McDonald's, Southwest Airlines, Johnson & Johnson and Krispy Kreme all have in common? 

All were founded in recessions, depressions or bear markets.

Entrepreneurs and Recessions: Do Downturns Matter?, December 2008  

Entrepreneurs are the answer. Seventy percent of U.S. registered voters think the health of the economy depends on the success of entrepreneurs. 

Luntz, Maslansky Strategic Research Survey (sample size: 816), September 2008 

Let's hear it for the next generation. Four in ten U.S. young people ages 8 to 21 have or would like to start their own business someday, and 63 percent agree that they have the ability to successfully start their own business. 

Harris Interactive® Survey (sample size: 2,438), July/August 2007

The Demographics

Fifty-four percent of the nation's Millennials either want to start a business or already have started one.

Young Invincibles Policy Brief, November 2011

Despite the fact that about 46 percent of the workforce and more than 50 percent of college students are female, they represent only about 35 percent of startup business owners.

Overcoming the Gender Gap: Women Entrepreneurs as Economic Drivers, September 2011

Of new firms…

  • 70 percent are men-owned; 30 percent are women-owned
  • 81 percent are white-owned
  • 9 percent are African-American-owned
  • 6.6 percent are Hispanic-owned
  • 4 percent are Asian-owned
  • 5 percent are owned by Native Americans, Pacific Islanders and individuals of other racial groups

The Kauffman Firm Survey, March 2008

Think tech companies are founded only by 20-somethings? Think again. The average age of U.S.-born tech founders when they started their companies was 39. In fact, twice as many were older than 50 as were younger than 25. 

Education and Tech Entrepreneurship, May 2008

In 2002, 6.5 million privately held, women-owned firms generated an estimated $940 billion in sales and employed 7.1 million people; however, women-owned firms still underperform men-owned firms.

Characteristics of New Firms: A Comparison by Gender, January 2009

Show Them the Money

According to 2007 data, new businesses have a higher propensity to use websites (51.5 percent compared to 24.8 percent of all firms) and to sell online (26.8 percent compared to 6.0 percent of all firms), thus impacting capitalization and longevity.

Casting a Wide Net: Online Activities of Small and New Businesses in the United States, October 2011

Nearly 75 percent of most firms' startup capital is made up of equal parts owner equity and bank loans and/or credit card debt.

The Capital Structure Decisions of New Firms, November 2008  

Angel investors participating in organized groups achieve an average 27 percent internal rate of return.

Returns to Angel Investors in Groups, November 2007

High-tech firms receive more outside equity investments in their first year of operations than any other type of company—on average, $31,216 compared with firms' overall average of $7,000.

The Capital Structure Decisions of New Firms, November 2008

The Immigrant Force

In 2007, the immigrant rate of entrepreneurial activity—0.46 percent—was substantially higher than the native-born U.S. population—0.27 percent. 

Kauffman Index of Entrepreneurial Activity 1996-2007, April 2008

Thirty-one percent of the engineering and technology companies founded from 1995 to 2005 had an immigrant as a key founder compared with the national average of 25.3 percent.

Education, Entrepreneurship, and Immigration: America's New Immigrant Entrepreneurs, Part II (based on a survey of eleven technology centers), June 2007

Foreign nationals residing in the United States were named as inventors or co-inventors in 25.6 percent of international patent applications filed in the U.S. in 2006.

Intellectual Property, the Immigration Backlog, and a Reverse Brain-Drain: America's New Immigrant Entrepreneurs, Part III, August 2007

Other Cool Stuff

Young businesses initially are 3 percent more productive than mature businesses; after five years, their productivity advantage increases to 5 percent.

Turmoil and Growth: Young Businesses, Economic Churning, and Productivity Gains, June 2008 

Of 5,000 businesses started in 2004, a little more than 2 percent reported owning patents during their first year of operation, while nearly 9 percent reported having copyrights and 13.5 percent had trademarks.

The Kauffman Firm Survey, March 2008

These states take the cake. Massachusetts, Washington, Maryland, Delaware and New Jersey are leading the United States' transformation into an entrepreneurial, knowledge- and innovation-based New Economy.

The 2008 State New Economy Index, November 2008