Opening up a small business in a tough economy is a risky gamble. But vermont is one of 10 states that saw more startup activity than anywhere else in the nation in 2011, according to the Kauffman Index of Entrepreneurial Activity. The ranking is based on the number of startups per 100,000 adults. Vermont is ranked eighth in the US with 390 startups per 100,000 adults. Vermont is the highest ranked state east of the Mississippi. Arizona was far and away first among states with 520 startups.
The US average rate of business creation was 320 per 100,000 adults, a decline from the 340 average in 2010, which represents a drop of 5.9 percent. This 0.32 business-creation rate translates into approximately 543,000 new businesses being created each month during the year. While there was an overall drop from 2010, in the last 15 years, the data show that entrepreneurs are getting older, less white, more male, more immigrant and less educated.
In its analysis, the Kauffman report said of Vermont: "The joke is that when people come to Vermont on vacation, they don't want to leave. According to state legend, iconic IBM chief Tom Watson Jr opened up a plant here because he loved skiing so much.
"Today, IBM is one of the biggest employers in Vermont. Other notable companies include General Electric and Ben & Jerry's.
"Smaller biotech, bioscience, environmental engineering and other tech companies are drawn to Vermont's vibrant venture capital network and state funding for startups. If Vermont has a downside, it's the high rates for individual income and businesses taxes.
"Many innovative firms get their start in incubators based at the state's top-notch schools, like the University of Vermont's Fletcher Allen Medical School. Such academic powerhouses also help produce a highly skilled workforce for entrepreneurs to hire.
"And when they need to take a break from business, entrepreneurs can let off steam at the the state's beautiful parks and hiking trails."
The Kauffman Index of Entrepreneurial Activity is a leading indicator of new business creation in the United States. Capturing new business owners in their first month of significant business activity, this measure provides the earliest documentation of new business development across the country. The percentage of the adult, non-business-owner population that starts a business each month is measured using data from the Current Population Survey (CPS). In addition to this overall rate of entrepreneurial activity, separate estimates for specific demographic groups, states, and select metropolitan statistical areas (MSAs) are presented. The Index provides the only national measure of business creation by specific demographic groups.
New 2011 data allow for an update to previous reports, with consideration of trends in the rates of entrepreneurial activity over the sixteen-year period between 1996 and 2011. The Kauffman Index reveals important shifts in the national level of entrepreneurial activity and shifts in the demographic and geographic composition of new entrepreneurs across the country. Key findings for 2011 include:
â ¢ The rate of business creation declined from
340 out of 100,000 adults in 2010 to 320 out
of 100,000 adults in 2011, which represents a
drop of 5.9 percent. This 0.32 business-creation
rate translates into approximately 543,000 new
businesses being created each month during
â ¢ Although the entrepreneurship rate declined in
2011, it remained more than 5 percent higher
than before the recession started. Over the past
decade and a half, the business creation rate
fluctuated within the range of 0.27 percent to
0.31 percent, but then rose above this level in
the past four years. A separate measure also
calculated in the report shows that, from 2007
to 2010, the quarterly employer establishment
birth rate dropped from 0.13 percent to 0.11
percent. These opposing trends may be due to
the Great Recession pushing many individuals
into business ownership because of high rates
of unemployment. These individuals probably
were more likely to start sole proprietorships
and other non-employer firms instead of more
costly employer firms.
â ¢ Both men and women experienced slightly
declining rates of entrepreneurial activity
â ¢ The entrepreneurial activity rate among
Latinos decreased from 0.56 percent in 2010
to 0.52 percent in 2011, but remained at a
high level relative to previous years and other
demographic groups. The Asian entrepreneurial
activity rate also decreased in 2011 (from 0.37
percent to 0.32 percent).
â ¢ Immigrants were more than twice as likely
as were the native-born to start businesses
each month in 2011. The immigrant rate of
entrepreneurial activity decreased from 0.62
percent in 2010 to 0.55 percent in 2011. The
native-born rate declined from 0.28 percent in
2010 to 0.27 percent in 2011.
â ¢ The aged 20â 34 and aged 45â 54 groups
experienced increases in entrepreneurial activity
from 2010 to 2011, whereas the aged 35â 44
and aged 55â 64 groups experienced decreases
â ¢ Over the past sixteen years, Latinos, Asians, and
immigrants experienced rising shares of all new
entrepreneurs, partly because of rising rates of
entrepreneurship, but also because of increasing
populations. The oldest age group (ages 55â 64)
also experienced a rising share of all new
entrepreneurs, mainly because it represents an
increasing share of the population.
â ¢ Although the entrepreneurship rate declined for
high school dropouts from 2010 to 2011 (0.59
percent to 0.57 percent), the rate remained
much higher than the pre-recession level, which
may be due to lingering high unemployment
rates pushing many individuals into business
ownership or changing patterns of outsourcing
â ¢ The construction industry had the highest rate
of entrepreneurial activity of all major industry
groups in 2011 (1.68 percent). The secondhighest rate of entrepreneurial activity was in
the services industry (0.42 percent).
â ¢ From 2010 to 2011, entrepreneurial activity
rates decreased in all regions of the country
except the Northeast, which experienced a
slight increase in rates. Entrepreneurship rates
are highest in the West and lowest in the
â ¢ The states with the highest rates of
entrepreneurial activity were Arizona (520
per 100,000 adults), Texas (440 per 100,000
adults), California (440 per 100,000 adults),
Colorado (420 per 100,000 adults), and Alaska
(410 per 100,000 adults). The states with
the lowest rates of entrepreneurial activity
were West Virginia (150 per 100,000 adults),
Pennsylvania (160 per 100,000 adults), Hawaii
(180 per 100,000 adults), Illinois (200 per
100,000 adults), Indiana (200 per 100,000
adults), and Virginia (200 per 100,000 adults).
â ¢ The states experiencing the largest increases
in entrepreneurial activity rates over the
past decade were Nevada (0.23 percentage
points), Georgia (0.18 percentage points),
Massachusetts (0.16 percentage points),
Tennessee (0.15 percentage points),
California (0.13 percentage points), Louisiana
(0.12 percentage points), and Florida (0.12
percentage points). States that experienced the
largest decreases in entrepreneurial activity rates
were Wyoming (-0.17 percentage points) and
New Mexico (-0.13 percentage points).
â ¢ Among the fifteen largest MSAs in the United
States, the highest entrepreneurial activity rate
in 2011 was in Los Angeles (580 per 100,000
adults). The large MSAs with the lowest rates
of entrepreneurial activity were Chicago
(180 per 100,000 adults) and Detroit (180 per
See top ten ranking with analysis HERE. See INTERACTIVE MAP. See full PDF report HERE.
Source: The Kauffman Index of Entrepreneurial Activity, June 2012. Report authored by Robert W Fairlie, Professor of Economics at the University of California, Santa Cruz.