Entrepreneurship is slowing???

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We seem to be in a golden age of startups.  From my nearly quarter century view as a serial entrepreneur, it certainly seems that entrepreneurship does nothing but rise year after year.

Surprisingly, the U.S. Department of Labor says otherwise.  According to the Bureau of Labor Statistics entrepreneurship has been declining.

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According to the same research, the death rate of small businesses is exceeding the birth rate.

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Three possible answers to the difference between how the startup market feels vs. what the data says:

1- The Department of Labor doesn’t make a distinction between scalable startups, the corner bakery, or a solopreneur web designer.  To the DoL, a new business is a new business.  Perhaps the recession quashed a lot of dreams of corner bakeries?

2- There are lot more dreamers than doers.  Perhaps the seeming rise in startups is more wannapreneurs than entrepreneurs, dreaming of starting a startup, talking about their startup, but not launching their startup.

3- The ease of starting a startup has dropped to the point where fewer founders are “all in”.  Perhaps more founders are doing their startups on evenings, weekends, and during breaks in their workday, not quitting their job, and thus not appearing as small business owners in the DoL statistics.

My gut says that the truth is a mix of all three of these reasons.  However, the trigger for pulling up this research was an article from The Atlantic: The Rate of New Business Formation Has Fallen By Almost Half Since 1978.  And that headline seemed too incredible to believe.

Further confirmation of this drop comes from The Kauffman Foundation and the Brookings Institute, as reported in The Washington Post: The Decline of American Entrepreneurship.

What do you think is happening here?  Add a theory in the comments below…

 

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