22 May 2013

Total Early-Stage Entrepreneurship Activity (TEA) at Record Levels.

Early stage entrepreneurship levels are at their highest levels since at least 1999.

Professors from Babson and Baruch Colleges have just  issued their 2012 Global Entrepreneurship Monitor (GEM). This report attempts to capture entrepreneurial activity on the ground - not just startups funded from venture capitalists or banks. And the news looks good. Entrepreneurship is on the rise.

You can read the GEM press release here, and the full GEM report here.

Some positives from their report 
  • 13% of the US adult population is engaged in entrepreneurship
  • First generation immigrants are even more likely - at 16% - to be engaged in entrepreneurship
  • There are 7 female entrepreneurs for every 10 male entrepreneurs
  • Three-fourths of entrepreneurs do it to pursue an opportunity rather than out of necessity
  • 37% project a business with 5 or more employees in 5 years
A couple of negatives are the obstacles mentioned. Compared to similar countries, American entrepreneurs have more trouble with financing and struggle more with fear of failure. It seems to me that communities could do a lot to alleviate the first and corporations could do a great deal to alleviate both problems. 

Compared to other innovation-driven economies, the US has twice the rate of "stops" stemming from financing failures. Venture capital markets are strong but only a few entrepreneurs qualify. This suggests to me that governments would do well to create something for entrepreneurs akin to college loan programs, a way to subsidize small entrepreneurs.

And as to fear of failure, that still suggests to me that corporations would be wise to harness the high-levels of entrepreneurial initiative in this country by creating more opportunities for entrepreneurship within their business. My guess is that many optimistic entrepreneurs who are now employees would think it a great deal to avoid the risk of salary loss in return for giving up something like half of their expected profits. Do corporations have money to invest in such ventures? Well, only if you count the $2 trillion in cash (by some estimates $5 trillion in liquid assets) held by the Fortune 500.

Total Early-Stage Entrepreneurial Activity (TEA) is up, according the folks at Babson and Baruch Colleges. And it will just continue to rise if my theory about our entering a fourth economy has any merit. If that is true, this TEA measure could become to the future what the Dow Jones Industrial Average has become. That is, a way to measure something terribly important that  has - nonetheless - eluded quantification until now. And as communities become more savvy about the importance of entrepreneurship, watch this index become as common as the Dow. 

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