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Report: Entrepreneurship Rates Decline as Pandemic Disruptions Ease

  • Kauffman Indicators of Entrepreneurship report looks at early-stage entrepreneurship in the United States
  • New entrepreneur rate drops from 2020, but more people are launching ventures out of opportunity rather than necessity
  • Startup survival rate improves, but startup job creation has been on the wane

By Dirk Langeveld

Entrepreneurial activity in the United States has cooled down as disruptions from the COVID-19 pandemic ease, according to a report from the Kauffman Foundation. Entrepreneurship remains elevated compared to before the pandemic, though the job creation credited to new businesses has been on the wane.

The Kauffman Indicators of Entrepreneurship report on early-stage entrepreneurship is issued annually. It focuses on four key factors: the rate of new entrepreneurs in the U.S., the share of new entrepreneurs launching a venture as an opportunity rather than out of necessity, the number of jobs created by startups per capita, and the one-year average survival rate of new firms.

The rate of new entrepreneurs in 2021 was 0.36, indicating that 360 out of 100,000 people launched a business in any given month during the year. This was down from a rate of 0.38 in 2020, but still up from the rate of 0.31 in 2019. New entrepreneurs were defined as spending at least 15 hours a week on their business in the preceding month.

Entrepreneurship rates were higher in certain demographic groups, including 0.58 among immigrants and 0.54 among Latinos. Men were more significantly likely to be entrepreneurs than women, with a rate of 0.45 for the former and 0.28 for the latter. New entrepreneurs also tended to be older, with the 45-54 age group having the highest rate at 0.44.

The share of entrepreneurs starting a business as an opportunity was up, following a spike in entrepreneurship driven by layoffs, business closures, and other pandemic impacts. These entrepreneurs were not unemployed or looking for a job when they started their business. The 2020 opportunity share stood at 69.8 percent, its lowest point in 25 years. In 2021, the share rose to 80.9 percent, though this was still below the 2019 figure of 86.9 percent.

The startup job creation rate in 2021 stood at 4.7 jobs per 1,000 people, down from the 2019 level of 5.1 jobs per capita. The Kaufman Foundation says there has been a “worrisome” trend of declining job creation rates among startups, which have fallen from a peak of 7.9 jobs per capita in 1997.

The one-year startup survival rate was 81.7 percent, up from 78.4 percent in 2020. Survival rates have been on the increase since the Great Recession, rising from 75.2 percent in 2009 to 79.4 percent in 2019.

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