National Report on Early-Stage Entrepreneurship in the United States (2020)

The Kauffman Indicators of Early-Stage Entrepreneurship is a set of measures that represents new business creation in the United States, integrating several high-quality, timely sources of information on early-stage entrepreneurship.

This report represents four indicators that track early-stage entrepreneurship for the years 1996-2020: rate of new entrepreneurs reflects the number of new entrepreneurs in a given month, opportunity share of new entrepreneurs is the percentage of new entrepreneurs who created their businesses out of opportunity instead of necessity, startup early job creation is the total number of jobs created by startups per capita, and startup early survival rate is the one-year average survival rate for new firms. We report national trends for the four indicators as well as some demographic trends for the rate of new entrepreneurs and opportunity share of new entrepreneurs.

The rate of new entrepreneurs was substantially higher in 2020 than in 2019 or in previous years, reflecting more transitions into entrepreneurial activity, broadly defined, among the population during pandemic conditions. At the same time, the opportunity share of this activity plummeted to the lowest share in 25 years, indicating that many of these transitions were undertaken by people with few other options for economic engagement.

Report Highlights:

Nationally, the rate of new entrepreneurs in 2020 was 0.38%, meaning that an average of 380 out of every 100,000 adults became new entrepreneurs in a given month. The monthly rate increased substantially in 2020 as the economy went through shutdowns, job losses, and reopenings that characterized the COVID-19 pandemic.
The rate of new entrepreneurs was 0.30% among women and 0.48% among men, reflecting large increases for both from the previous year.
In 2020, the rate of new entrepreneurs was 0.52% among Latinos, 0.38% among African Americans, 0.35% among Asians, and 0.36% among whites. It increased for all groups from the previous year.
The rate of new entrepreneurs was 0.59% for immigrants – substantially higher than that for native-born Americans (0.34%). The rate of new entrepreneurs increased for both groups over the past year.
The rate of new entrepreneurs was highest among the 45-55 year age group (0.49%) and lowest among the 20-34 year age group (0.28%). It increased sharply for all age groups.
The opportunity share of new entrepreneurs was 69.8% in 2020, representing a substantial drop from 2019 (86.9%). This opportunity share of new entrepreneurs is the lowest over the past 25 years and perhaps longer. The decline from 2019 to 2020 during the pandemic was 17.1%, much larger than the one-year decline of 6.9% from 2008 to 2009 during the Great Recession.
The opportunity share of new entrepreneurs declined sharply for both women and men in 2020.
All ethnic and racial groups experienced large drops in the opportunity share in 2020, reversing upward trends over the past few years. Asian new entrepreneurs experienced the largest drop in the opportunity share (10.4%), followed by African American new entrepreneurs (6.3%).
The opportunity share of new entrepreneurs dropped substantially for immigrants and the native-born population in 2020.
All age groups experienced large decreases in the opportunity share, reversing upward trends since the Great Recession.
Startup early job creation and startup early survival rates are based on data cycles that end in March, meaning that both indicators cover the first few months of 2020.
National startup early job creation in 2020 was 5.0 jobs per capita, meaning that startups hired five jobs for every 1,000 people.
The startup early survival rate was 78.1% in 2020, meaning that almost eight in 10 startups survived the first year. This survival rate was down substantially from the previous year, and it was the first drop in the survival rate since the Great Recession.
The overall KESE Index – an equally-weighted composite of the four indicators – was -0.2 nationally. The index dropped substantially from 1.1 in 2019, recording the largest drop since the Great Recession. The index is normalized at zero.