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What our members have to say...
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"Thank you for your email yesterday regarding an extension of your services.
In fact I now have the necessary investors in my business, one of whom came
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Gauging state start-ups is crucial for jobs push
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Just how entrepreneurial are people in Wisconsin? The answer depends on who's asked.
The question usually arises this time of year when the Kauffman Index of Entrepreneurial Activity is published by the Ewing Marion Kauffmann Foundation, a private foundation committed to building America's capacity to launch and grow start-up businesses.
Year after year, Wisconsin comes across in the Kauffman index as a place where entrepreneurs are scarcer than palm trees in Pewaukee.
The 2011 index ranked Wisconsin as third-worst among the 50 states in overall entrepreneurial activity. That puts us in a class with West Virginia, Pennsylvania, South Dakota, Indiana and, surprisingly, Minnesota - a state that usually ranks among the top 10 states for attracting venture capital.
While few economists and other observers would pretend Wisconsin is a second Silicon Valley when it comes to entrepreneurism, there's also good reason to question if Wisconsin is West Virginia minus the coal mines and the mountains.
What does the Kauffman Index measure - and how do other reliable reports compare?
How it measures
The Kauffman Index is calculated by the University of California-Santa Cruz using the U.S. Census Current Population Survey. It represents the percentage of adults, aged 20 to 64, who become self-defined entrepreneurs within a given survey year.
Specifically, it measures the percentage of adults who do not own a business in the first survey month who start a business in the following month with 15 or more hours worked.
While the index is a rich measure of business creation, it doesn't measure business destruction. In other words, many people in Nevada (ranked No. 1 in the 2010 survey, by the way) may have started businesses due to that state's jarring real-estate crash, but that doesn't mean those businesses will last.
The Kauffman index also doesn't measure the background level of existing entrepreneurs. For example, entrepreneurs who may have started businesses in previous years aren't counted. And the state doesn't get credit for an established entrepreneurial base.
Finally, the report doesn't measure the quality of entrepreneurial jobs created.
The most common entrepreneurial industry, according to the Kauffman index, is construction. The entrepreneurial rate in construction grew nationally between 2007 and 2010, which suggests many people in that industry lost their jobs during the crash and are trying to make it on their own - even if that means working part time on Aunt Bertha's bathroom remodeling.
And because the Kauffman survey also measures educational attainment, it shows that the highest rates of entrepreneurism nationally are among people who list their education as "less than high school" and "high school only."
Other surveys have shown Wisconsin with higher but still below-average rates of "net business" creation.
"Measuring Success: Benchmarks for a Competitive Wisconsin," an annual report for Competitive Wisconsin Inc., suggests the state's business survival rate is somewhat higher, and that high-tech employment - often an indicator of start-up activity - is growing as a percentage of the total workforce.
Another piece of puzzle
Another source of information is the Wisconsin Department of Financial Institutions, which charts new business incorporations, year on year.
With the exception of 2009, the peak recession year, DFI figures for domestic and foreign filings has climbed each year - led by filings by limited-liability corporations, an incorporation method often used by entrepreneurs.
The number of LLCs filed in Wisconsin rose from 3,478 in 1996 to 26,982 in 2006 before leveling off. That figure represents about four-fifths of all new corporate filings charted by DFI. However, the agency doesn't track sole proprietorships, which are a big piece of the entrepreneurship picture in any state.
Finally, entrepreneurism at the higher end of the spectrum can be measured by looking at investment dollars flowing into emerging companies. Angel investing in Wisconsin continues to grow, and venture capital investing, while far behind the U.S. average, is poised for growth as angel-backed companies mature.
Why is it important to better measure entrepreneurship in Wisconsin? It's vital to the ongoing discussion about job growth.
If entrepreneurs and start-up companies are truly the source of most new jobs in the United States, as most studies indicate, then it's crucial to know why people launch their own companies - or not - and what factors help them succeed.
Ten years ago, Wisconsin didn't have a support system for entrepreneurs. Today, a solid albeit far-from-perfect foundation is in place. Measuring what works - especially with high-quality, high-growth companies - will help determine how Wisconsin approaches the ambitious task of adding 250,000 jobs in four years.
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