The story of U.S. entrepreneurial activity over the last three years has remained largely the same. Better than it was. Not as great as it has been.
Almost a decade after the recession's onset, startup activity is back above 2008 levels, according to the nonprofit Kauffman Foundation's annual report on the state of the entrepreneurial economy. The level of activity rose significantly in the two years following its 2013 nadir, and then increased slightly last year. In 2016 the number of people becoming new entrepreneurs each month was around 540,000, down slightly from 550,000 the year before. In better news, the number of startups with employees ticked up, to 85.4 per 1,000 employer companies from 81.6 in 2015.
The number of employer businesses is especially important because those companies have greater potential for growth than solo endeavors. While the measure is improving, it remains roughly 20 percent below pre-recession levels and down from the previous three decades. The same trend has occurred in the rate of startup growth. In 2016, five-year-old companies grew to an average of more than 10 employees, from an average of less than six employees at their founding. The growth rate represents an increase of more than five percentage points from 2015. But it remains historically low.
"Despite the rebound in recent years, high-growth firms create fewer jobs than they did in the past," says Arnobio Morelix, a researcher and author on the report. "It reflects the new nature of entrepreneurship in the U.S."
The "share of scaleups" followed a similar trajectory. In 2016, 1,100 out of every 100,000 businesses that were 10 years old or younger had reached 50 employees. That number is largely flat from 2015, high relative to the recession, and down significantly from 2001.
The prevalence of high-growth companies as determined by revenue has essentially plateaued over two years, at 79 per 100,000 U.S. employer businesses. That finding, derived from data collected by Inc., covers private businesses with at least $2 million in annual revenue and 20 percent revenue growth over three years. Tech-associated industries like IT services, software, computer hardware, and health continue to play a dominant role among high-growth firms.
"The overarching story is the decline in dynamism," says Morelix. "Fewer startups. Fewer high-growth companies by employment. And there seems to be declining dynamism in high-growth by revenue."