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Motivations for Entrepreneurship

Trends in Entrepreneurship | Take a closer look at what motivates an individual to become an entrepreneur, and how it can reflect the broader economic environment as well as influence the nature and direction of the business activity itself.

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Featured highlights:

  • In 2018, the opportunity share of new entrepreneurs was 86.2%, indicating that nearly 9 out of 10 new entrepreneurs were pursuing a business opportunity and about 1 in every 10 new entrepreneurs likely lacked other options in the labor market.
  • Fewer women became new entrepreneurs than men. When they did, women were more likely to be pursuing a business opportunity than their male counterparts.
  • Employer businesses are the subset of businesses that hire employees. In 2016, among employer business owners, the most common reasons for starting a business were pursuing a greater income (55.5% said this was very important) and wanting to be their own boss (55.4% said this was very important). Being their own boss was very important to 60.3% of men compared to 44.2% of women employer business owners.
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How Quickly do New Employer Businesses Hire?

Entrepreneurship is often heralded as important to the economy because of its job creation effects. These jobs come from new employer businesses, a small but important subset of entrepreneurial activity in the United States.

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New employer business velocity reflects the average amount of time it takes for a new business to become an employer, given that they reach this milestone within eight quarters. New businesses are considered to become employers when they make a first payroll. This is measured in quarters, which range from 90 to 92 days.

Learn more about the national and state trends of new employer business velocity:

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New Employer Business Report: National and State Trends (2018)

The Kauffman New Employer Business Indicators series provides users with measures to track trends surrounding the emergence of new employer businesses, their representation in the population and among all firms, and the time it takes these businesses to become employers. Explore the national and state trends from 2018.

The Kauffman New Employer Business Indicators series has been compiled in an effort to provide information on new employer businesses, a subset of all entrepreneurial activity. This report presents indicators for the United States, and all 50 states and Washington, D.C., beginning in 2005 and through the most recent year of data available for each metric.

What are the New Employer Business Indicators?

  • New employer business actualization – The share of business applications that become employers (achieve a first payroll) within eight quarters of the application.
  • Rate of new employer businesses – The number of startups that become employers for every 100 people.
  • New employer business velocity – The average amount of time it takes, in quarters, between business application and first payroll, conditioned on a business making payroll within eight quarters.
  • Employer business newness – New employer businesses as a share of all employer firms.

Report Highlights:

  • In 2018, the national rate of new employer business actualization was 11.33%, meaning that for every 100 new business applications, about 11 businesses made a first payroll within eight quarters. For the same year, the value of this indicator ranged from 6.59% in Delaware to 17.36% in Washington, with a median of 11.30% across states.
  • The national rate of new employer businesses was 0.12 in 2018, meaning there were 120 new employer businesses for every 100,000 people. This ranged from 0.07 in West Virginia to 0.31 in Wyoming, with a median of 0.12 across states.
  • In 2014, the national new employer business velocity was 1.92, indicating that, on average, approximately six months pass between business application and first payroll. For the same year, the value of this indicator ranged from 1.46 in North Dakota to 2.37 in Washington, D.C., with a median of 1.83 across states.
  • In 2016, national employer business newness was 6.8%, meaning that almost 7 out of every 100 employer businesses were new businesses that made a first payroll within the first eight quarters. This ranged from 4.44% in Washington, D.C., to 8.67% in Nevada, with a median of 5.99% across states.
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Educational Attainment of Business Owners

This brief explores trends in educational attainment among entrepreneurs who start employer businesses (firms with paid employees) in the United States. In this brief, entrepreneurs are defined as employer business owners with at least 51% stock or equity in the business.

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Highlights include:

  • Approximately half (51.4%) of all entrepreneurs held at least a bachelor’s degree.
  • Educational attainment of entrepreneurs varied little by gender.
  • The portion of entrepreneurs with a bachelor’s degree was highest among Asian entrepreneurs (29.6%).
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Annual Receipts Among Employer Businesses in the United States

This brief explores trends in annual receipts among entrepreneurs who start employer businesses in the United States. In this brief, entrepreneurs are defined as employer business owners with at least 51% stock or equity in the business. Receipts are defined as the total sales, shipments, receipts, revenue, or business done by establishments with paid employees.

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Highlights include:

  • The majority of employer firms (more than 80%) had receipts in excess of $100,000 in annual value.
  • Male entrepreneurs (28.6%) were more than one-and-a-half times more likely to own firms with receipts greater than $1,000,000 than female entrepreneurs (17.8%).
  • White entrepreneurs (26.1%) were more than one-and-a-half times more likely than African American entrepreneurs (15.0%) to own a business with receipts greater than $1,000,000.
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Measuring Accelerator Performance

Understanding the performance of accelerators is important to a wide range of individuals and organizations: participating startups, accelerator managers and staff, investors, partners, donors, funders, and policymakers.

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Each of these stakeholders may have different priorities and objectives in their efforts to measure accelerators’ performance and impact. Startups, for example, may be most interested in participating companies’ survival rates, revenues, and growth. By contrast, an accelerator manager’s top concern may be average returns from a cohort. An investor may be most interested in deal-making efficiency, and a policymaker may prioritize startup job creation or an accelerators’ impact on local industries.

Learn more about the “4Cs” of Accelerator Measurement: Consistency, Coordination, Comparison, and Continuation.

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Accelerators: The Basics

Accelerators are entrepreneurship support programs primarily aimed at helping participating startups scale-up and access early customers.

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Popular since the mid-2000s, accelerators are cohort-based programs that provide access to supportive services like mentorship and trainings. Accelerator programs run for a fixed-term, usually several months, after which participating startups “graduate.” Graduation events are often “demo days” where startups pitch to selected groups of investors, media, and other stakeholders.

Do accelerators matter…

…for raising funds?

…for reaching key milestones?

…for all entrepreneurs?

…for the broader regional community?

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State Report on Early-Stage Entrepreneurship in the United States (2018)

This report presents state trends in early-stage entrepreneurship in all 50 states and the District of Columbia from 1996-2018.

The Kauffman Indicators of Early-Stage Entrepreneurship is a set of measures that represents new business creation in the United States, integrating several high-quality, timely sources of information on early-stage entrepreneurship.

This report presents four indicators tracking early-stage entrepreneurship for the years 1996-2018: rate of new entrepreneurs reflects the number of new entrepreneurs in a given month, opportunity share of new entrepreneurs is the percentage of new entrepreneurs who created their businesses out of opportunity instead of necessity, startup early job creation is the total number of jobs created by startups per capita, and startup early survival rate is the one-year average survival rate for new firms. State level trends are reported for all four indicators.

Report Highlights:

  • The rate of new entrepreneurs ranged from a low of 0.12% in Rhode Island to a high of 0.46% in Florida, with a median of 0.29%.
  • The opportunity share of new entrepreneurs ranged from a low of 68.43% in Wisconsin to 94.05% in South Dakota, with a median of 85.68%.
  • Startup early job creation ranged from 3.06 jobs per 1,000 people in West Virginia to 11.32 in Washington, D.C., with a median of 4.68.
  • Startup early survival rate ranged from 70.94% in Missouri to 81.97% in Mississippi, with a median of 79.4%.
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National Report on Early-Stage Entrepreneurship in the United States (2018)

This report presents national trends in early-stage entrepreneurship for the years 1996-2018 in the United States, as well as trends for specific demographic groups when possible.

This report presents four indicators that track early-stage entrepreneurship for the years 1996-2018: rate of new entrepreneurs reflects the number of new entrepreneurs in a given month, opportunity share of new entrepreneurs is the percentage of new entrepreneurs who created their businesses out of opportunity instead of necessity, startup early job creation is the total number of jobs created by startups per capita, and startup early survival rate is the one-year average survival rate for new firms.

Report Highlights:

  • The rate of new entrepreneurs in 2018 was 0.32%, which reflects that 320 out of every 100,000 adults became new entrepreneurs in an average month.
  • The opportunity share of new entrepreneurs was 86.16% in 2018. This figure is up slightly from 2017, when it was 84.37%, and it is more than 10 percentage points higher than it was in 2009 (73.84%).
  • Startup early job creation was 5.20 jobs per 1,000 in 2018, reflecting an increase from 4.47 in 2010.
  • The startup early survival rate was 79.43% in 2018, essentially remaining constant over the past few years.
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