Over the past two years more than 25 million Americans started or were running new businesses in an economy that continues to show moderately healthy growth, according to the Global Entrepreneurship Monitor (GEM) 2016 United States Report released by Babson College.
Perception of Opportunity Increased
There are two types of entrepreneurs: those motivated by necessity and those motivated by opportunity. The nation’s economy usually dictates which is most plentiful, said Donna Kelley, Babson College professor of entrepreneurship and co-author of the GEM report.
“In 2009 and 2010, after the recession, we saw a drop in the percentage of people in the general population that said they saw opportunities,” Kelley told RewardExpert. “As a result, there were fewer people entering entrepreneurship. Those who were still starting businesses were more necessity motivated. They may have lacked better options for work, so they entered entrepreneurship to generate income.”
Compared to earlier years, opportunity perception increased dramatically in 2016, nearly doubling from 2009’s numbers. According to GEM data, 57 percent of the working-age population in the U.S. saw good business opportunities around them that year.
“This is important because it not only indicates the potential for people to become entrepreneurs and the opportunities for them to pursue, but also the extent to which society may support entrepreneurs,” Kelley said. “For example, if I think positively about entrepreneurship, I might be more likely to buy products from somebody new or support a family member who wants to go into business.”
Kelley explained that capability perception among working-age Americans is also very high. “More than half the adults in the U.S. feel that they have the ability to start a business,” she continued. “There’s a lot of visibility around entrepreneurship, and a lot of assistance programs, whether public or private. This has been a pretty stable indicator over time.”
While she noted that fear of failure took an upward turn in 2016, reversing a three-year trend of gradual declines, she added, “it isn’t something for us to be alarmed at yet.”
Entrepreneurship Greatest Among 35- to 44-Year-Olds
Compared to other innovation-driven economies in which Total Entrepreneurial Activity (TEA) is highest among 25- to 34-year-olds, GEM data revealed greater U.S. entrepreneurship among the next oldest age group of 35- to 44-year-olds.
“It usually parallels the population,” Kelley explained. “In countries like Turkey or the Middle East, youth make up the majority of the population, so you have higher levels of youth entrepreneurship. The U.S. has an aging population, and these days there is more value being placed on experience. By the time you’re 35 to 44, you are more likely to have completed your education and have gained some experience,” she said.
“You may also have more financial security,” she noted. “We tend to think that youth can take more risks because they don’t have mortgages and kids in college like the 35- to 44-year-olds do. But at the same time, entrepreneurship may be a little less risky for that older group because they have the resources, confidence, and experience to be successful.”
Kelley said a recent Babson College survey of alumni found that more than 45 percent were running or had run their own businesses. However, the majority had done so after gaining work experience.
“Even at Babson College, the top entrepreneurship school in the country, we don’t necessarily advocate starting a business as soon as you graduate,” Kelley added. “Some of our students do, but the majority of them go out and work first.”
Number of Women Entrepreneurs Continues to Increase
GEM data found that from 2015 to 2016, across 51 economies that participate in the GEM study, women’s entrepreneurship rates increased by 10 percent on average, versus 5 percent for men. In the U.S. the rate of entrepreneurship among women increased by about 1 percent while remaining stable for men.
“It was a very small increase,” Kelley noted, “but there is definitely a lot of awareness about women’s entrepreneurship and its substantial contributions to economic development. While women are still starting businesses at a lower rate than men, we hope that the environment will improve over time and inspire more women to go out there and become entrepreneurs.”