For the first time since the Great Recession, 2016 saw an increase in entrepreneurship in the U.S. Main street entrepreneurship finally climbed above pre-recession levels; startup activity continued the upward trend begun in 2015; business growth rates soared. In general, people are feeling pretty good and optimistic; the rate of people becoming entrepreneurs in a given month has increased 15% in the last two years.
But these broad-stroke trends, detailed in the Kauffman Foundation’s 2017 State of Entrepreneurship report, don’t show the whole picture. "This was an uptick year in the broader picture of long-term decline," Victor Hwang, one of the authors of the report, tells Co.Exist. "We still don’t know if it’s signaling an upward trend, or is just a blip on the way down." Rates of entrepreneurship today, Hwang says, are still half of what they were a generation ago.
While the Kauffman Foundation will continue to examine the overall direction of entrepreneurship in the U.S., the report does point to key areas for growth that are still underrepresented in the overall business start-up landscape. By 2050, it’s projected that over half of the U.S. population will be from racial minority backgrounds, but you would not guess that by looking at the demographics of current entrepreneurs: 80.2% are white, and 64.5 are white males. "There’s not a level playing field for people from different races or different genders," Hwang says.
These gaps have an impact: If minorities started and owned businesses at the same rate as non-minorities, the U.S. would see over 1 million new businesses, and over 9.5 million new jobs. The lag in female entrepreneurship—far from a new trend—costs the U.S. around 1.7 million employer businesses.
It’s a blatant example of how systemic biases and barriers do a disservice to the country as a whole, yet there’s no wide-scale solution to address these gaps. In 2016, the Kauffman Foundation awarded $4.3 million in grants to 12 organizations working to raise rates of entrepreneurship among women and minorities; some of the grantees include Propeller, a New Orleans-based incubator that supports ventures working to address issues from the region’s water crisis to community health disparities, and the Kapor Center for Social Impact in Oakland, which aims to boost STEM education for students of color. "There was not just one thing that worked," Hwang says. "But all of the initiatives were focused on the user experience of an entrepreneur: How do we get them in front of the right people? How do we work with communities to support entrepreneurship? How can we create access?"
On the heels of this new report, the Kauffman Institute is launching a new initiative, Zero Barriers to Startup—a collaborative, nationwide effort to identify barriers to entrepreneurship faced across different demographics and locations. In June, the Kauffman Foundation will host an EShip Summit in Kansas City to bring together small business owners, workers, community leaders and government officials from all 50 states in a discussion about how to support business development and growth. "It’s about trying to generate a movement," Hwang says. "By bringing these communities together to share practices and ideas, they can lift each other up and start to accelerate the process of breaking down barriers across the country." Kauffman will also release a playbook of best practices—a living document that communities can update with new strategies and findings.
While there are many factors that comprise barriers to entrepreneurship—access to capital and navigating bureaucratic red tape, for instance—Hwang says it’s important that we address these barriers now. "Entrepreneurs are the people building solutions and creating economic hope," he says. "The decline of entrepreneurship is linked to the decline in American competiveness and strength; by addressing this we’re getting to the heart of what makes America America."