First the good news. According to the 2017 Kauffman Index of Growth Entrepreneurship, entrepreneurship continued to grow nationwide in 2016, bouncing back strongly from the lingering effects of the Great Recession. What’s more, these startups are growing faster and larger than ever before.
According to the report, companies that turned five years old in 2016 grew an estimated 75.6% in their first five years of operation – “from almost six employees when they were founded to more than 10 employees for surviving businesses in their fifth year. This is an increase of more than 5 percentage points compared to 2015.”
The bad news is that these companies are creating fewer jobs than they did in the past, even as they scale up to new heights. Technology has enabled entrepreneurs to stand up businesses with little more than a laptop and an idea and, while that is a great thing for innovation, it has meant that startup job growth lags significantly with no end in sight. And that’s a problem, because startups account for almost all net new job creation.
But here’s the really interesting thing: Entrepreneurial growth is no longer limited to places like Silicon Valley, Boston and New York City. According to the Kauffman report, the five metropolitan areas with the highest levels of entrepreneurship in 2016 were, in order: Washington, D.C.; Austin, Texas; Columbus, Ohio; Nashville, Tenn.; and Atlanta, Ga.
“What this shows us is that, while Silicon Valley, Boston and New York City tend to grab national headlines, other areas of the country have been flying below the radar, quietly growing their ecosystems and nurturing entrepreneurial activity in their back yards,” wrote Bobby Franklin, president and CEO of the National Venture Capital Association, in the foreword of the report.
Among the largest states, the five posting the highest entrepreneurial growth activity were Virginia, Georgia, Maryland, Massachusetts and Texas. Among the smallest states, the five with the highest entrepreneurial growth activity were Utah, Hawaii, North Dakota, Nevada and New Hampshire.
Although high-tech companies play a dominant role, they aren’t the only ones experiencing growth. Entrepreneurial growth came from a huge swath of sectors, including food and beverage, retail and government services.”
This is proof of what AOL founder Steve Case predicted in his book and road show, Rise of the Rest. The next step in innovation is going to be regional, leveraging the diversity of the whole country to connect startup communities from coast to coast. Although we are based in St. Louis and invest nationwide, iSelect is thrilled to be a part of “the rest” and look forward to helping innovators continue this wave for years to come.