Originally Published: May 28th, 2015
U.S. start-up activity rose in 2015 with the help of more older workers becoming entrepreneurs, while fewer women and millennials are becoming new business creators, according to new data from the Kauffman Foundation.
Kauffman's analysis is one of the most comprehensive looks at start-up creators, and the annual start-up activity index rose in 2015—reversing a downward trend that started in 2010. This year's gain also marks the largest year-over-year increase from the past two decades.
The new data coupled with anecdotal evidence suggests an American recovery that is a work in progress. While prospects broadly are improving, pockets of older Americans haven't been able to re-enter the traditional workforce and have turned to entrepreneurship for their second and third acts. This group sometimes is called necessity entrepreneurs.
Older workers, aged 55 to 64 years old, comprised 25.8 percent of new entrepreneurs in 2014 compared to 14.8 percent in 1996.
Younger workers, meanwhile, saddled with massive student debt loans may be shying away from the huge capital outlays that new businesses require. And while employed women are leaping into entrepreneurship—a group sometimes called opportunity entrepreneurs—more men generally dive in entrepreneurship, based on Kauffman's yearly analysis.
"There's still a lot of recovery that needs to happen, which is the hard part," said E.J. Reedy, Kauffmann director of research and policy.
More older entrepreneurs; few women, millennials
Women launching businesses fell to 36.8 percent of new entrepreneurs compared to 43.7 percent in 1996, and close to the two-decade low of 36.3 percent in 2008.
The kinds of new ventures started by men partially helps explain what's happening among entrepreneurs broadly. Male entrepreneurs specifically are taking advantage of a recovering economy and housing sector.
"It's staking an opportunity, and the industries we see making a comeback including construction and manufacturing are more male-dominated," said Reedy.
American workers broadly are recovering, with eight out of every 10 new entrepreneurs not previously unemployed, while two out of every 10 new entrepreneurs started their businesses coming directly out of unemployment.
For young would-be entrepreneurs, the mounting student debt problem may finally be haunting the pace of America's innovation.
New entrepreneurs, aged 20 to 34 years old, fell to 24.7 percent in 2014, compared to 34.3 percent in 1996, according to Kaufman. New entrepreneurs ages 35 to 44 years old were 22.9 percent compared to 27.4 percent in 1996.
"It's important to realize there's still not a lot of direct evidence that debt is driving the decrease, but there is indirect evidence to show young households have become less financially stable, meaning their ability to take risk in entrepreneurship is diminished," Reedy said.
Fewer start-ups as employers
Another troubling trend is a dip in employer start-ups or new businesses that turn around and create new jobs—a lifeline of the U.S. economy.
"That is 150,000 new employer businesses lost in a given year—more than one million jobs lost from new business," Reedy said.
The decline in employer start-ups compared to before the recession—coupled with business turnover rates—suggest business owners may be jumping ship and not sticking around long enough to grow into larger businesses and ultimately larger employers.
Commonly cited roadblocks to entrepreneurship and retention include regulatory hurdles, uncertainty about future sales growth and hesitancy to invest in the near-term.
"In the past few years, there's more turn in new business activity, meaning the concerns that general small businesses have are now affecting the [transition to] bigger businesses," Reedy said.
Read the original article from CNBC here: