Posts Tagged ‘Kauffman Index of Entrepreneurial Activity’

Record Business Start-ups in 2009

Monday, May 24th, 2010
Onward and Upward

Onward and Upward

The Kauffman Foundation reports that in 2009, U.S. new business formations reached the highest level in 14 years, even exceeding the number of startups during the peak 1999 – 2000 technology boom. In 2009, the third year of the deepest recession since the Great Depression, 100,000 Americans started businesses each month, representing a 4% increase over 2008. The Kauffman Index of Entrepreneurial Activity also finds that African Americans and older Americans were the two demographic groups with the greatest increases in business creation rates year over year. Is this trend something to celebrate? The Kauffman Foundation seems to think so, but remember, most small businesses will fail and fewer than one in five survive to reach its fifth anniversary. The trend may represent an attempt to create self-employment from those who have been laid off and are discouraged in the job market. These new entrepreneurs are taking on significant risk, such as putting equity in a business, purchasing equipment and services and possibly guaranteeing debt for a business that might not succeed. Of course, that is always the risk in entrepreneurship, but older Americans do not have a long time horizon to play catch-up on retirement savings when a business fails. Let’s reserve judgment until 2014 when we see how the Entrepreneurial Class of 2009 fares on its fifth anniversary. To see the entire study of the Kauffman Foundation, click here.