More women, millennials and minorities are becoming entrepreneurs

Start-up activity rising with women, millennials
Start-up activity rising with women, millennials

Start-up activity in the U.S. increased in 2016, bolstered by growth among women, millennials and minorities, according to a new report.

The widely watched analysis from the Kauffman Foundation, released on Thursday, finds annual start-up activity rose in 2016 for the second-straight year after falling with the recession.

The rate of new entrepreneurs has increased nearly 15 percent over the past two years, translating to about 550,000 new business owners each month during the year.

The foundation has been publishing its report on American entrepreneurship since 1996, and the most recent data underscore the idea that the Main Street recovery is a work in progress.

"This is very encouraging, but we are still below our prerecession peak," said Arnobio Morelix, senior research analyst at the Kauffman Foundation. "Just two years ago, start-up activity was at its lowest point in 20 years."

Women are leading the charge. They make up 40.6 percent of new entrepreneurs. While that remains below the rate of men (59.4 percent), it is "the highest level we have seen since nearly 1996, and pretty significant," said Morelix.

Women were also more likely to be "opportunity entrepreneurs" than their male counterparts, meaning they decided to launch a business because they saw an opportunity in the marketplace, and were not forced into it by loss of a job.

Overall, 84 percent of new entrepreneurs were considered opportunity-driven — more than 10 percentage points higher than during the Great Recession. Eighty-five percent of new women entrepreneurs were launching due to opportunity, compared with 78 percent for men.

The report also finds Latino entrepreneurs have "risen dramatically," more than doubling since 1996 to 20.8 percent of all new entrepreneurs.

The index notes that new entrepreneurs across the U.S. are becoming increasingly diverse, with the most racial groups now being represented. Immigrants were also twice as likely as native-born Americans to launch businesses in this year's index.

Another promising sign: Activity among younger entrepreneurs in the age groups 20 to 34 and 35 to 44 has increased since 2015. However, both groups show start-up levels below what they were when the index began, indicating that younger people are still struggling to take the entrepreneurial leap for a variety of reasons.

"Student debt rising over time affects younger entrepreneur's cash flow, equity-building capacity and ability to get loans compared to other generations," Morelix said. "These are fundamental factors impacting entrepreneurship among young people."

The Kauffman report runs counter to recent data from Babson College. Its report, Global Entrepreneurship Monitor, found start-up levels declined in the U.S. in 2015.

This is due in part to the different ways these two research groups measure entrepreneurship. GEM data counts entrepreneurs who might still be working their full-time job when launching, whereas Kauffman does not count an individual as an entrepreneur until he or she leaves their full-time job.