North Dakota ranks in the top five states for highest startup activity, according to the 2015 Kauffman Index: Startup Activity.
The annual analysis measures the rate of new entrepreneurs, opportunity share of new entrepreneurs, and startup density across the nation at the state level and for the 40 largest metropolitan areas of the United States.
Although larger cities like Austin, Los Angeles, and San Francisco topped the charts for metropolitan startup activity, the top five states were North Dakota, Montana, Wyoming, Colorado, and Vermont.
The authors of the Kauffman Index attribute the high level of startup activity in these states to the very high real GDP growth most of these states have recently experienced.
“Historically, the Plains and Rocky Mountain regions have not been thought of as hotbeds of entrepreneurial activity,” said Arnobio Morelix, research analyst at the Kauffman Foundation, and one of the studies’ authors. “But entrepreneurship is closely associated with economic growth, so it should not be surprising that some of the states seeing increased levels of startup activity have experienced high rates of real GDP expansion in recent years.”
North Dakota Status Report
This year the startup density in North Dakota nearly doubled, spiking from 195.5 startups per 100,000 people in 2014, to 244.7 startups.
However, the other two factors measured by the Kauffman Index – rate of new entrepreneurs and opportunity share for new entrepreneurs – have gone down ever so slightly.
According to the report, about 0.27% of adults in North Dakota (270 out of every 100,000) became entrepreneurs in a given month compared to last year’s report of 0.28%.
Opportunity share also dropped from 92.8% in 2014 to 89.5% in 2015, meaning that this year 8.9 out of every 10 entrepreneurs did not come directly from unemployment. This indicates that market opportunities, while still good, are perhaps on the decline.
The Kauffman Index
The Kauffman Index: Startup Activity has three components:
|Rate of New Entrepreneurs: an early and broad measure of business ownership|
|Opportunity Share of New Entrepreneurs: a proxy indicator of the percent of new entrepreneurs starting businesses because they saw market opportunities.|
|Startup Density: the number of startup firms divided by total population of a place|
The Kauffman Foundation defines a startups as “firms less than one-year old employing at least one person besides the owner.”
The Kauffman Index of Entrepreneurship is the first and largest index tracking entrepreneurship across city, state and national levels for the United States, and also presents demographic characteristics of the business owners. The Kauffman Index: Startup Activity is the first of three reports to be released under the umbrella of the new Kauffman Index of Entrepreneurship. Future topics include “main street” businesses and growth ventures. The 2015 data allow for an update to annual reports dating back to 1996. Interactive data spanning all 18 years is available at www.kauffmanindex.org.
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Photos courtesy of The Kauffman Foundation.