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Arnobio MorelixSenior Research Analyst, Kauffman Foundation

MEASURING ENTREPRENEURSHIP ECOSYSTEMS FOR BETTER INTERVENTIONS

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Acknowledgments – Research & Policy

• Alicia Robb• Amisha Miller• Chris Jackson• Dane Stangler• EJ Reedy• Emily Fetsch• Jason Wiens• Jordan Bell-Masterson• Josh Russell• Rob Fairlie• Yas Motoyama

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Four Takeaways1. A tentative framework for making sense of the

complexity of entrepreneurship2. Applications of this framework in private and public

world3. Ingredients and recipes for a vibrant entrepreneurial

ecosystem4. Data + resources to get started

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Entrepreneurship has many moving parts

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Entrepreneurship many moving parts• Starting a business ≠ running a small business ≠ growing a business

– Different processes, different challenges

• We all know this. But we all of often talk about entrepreneurship as only one thing

• Challenges on– Measurement (what are we actually measuring?)– Targeting policy and intervention (what kind of activity do we care about?)– Stakeholders focus on different things (e.g., accelerator, v. small business authority,

v. tech initiatives)

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1) Framework for measuring ecosystemsand making sense of the complexity – version 1.0

Startup Local Small Business Growth

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3 Distinct Aspects of Entrepreneurship• Startup Activity

– New business creation• Small Businesses (“Main Street”)

– Local, small, business activity• Growth Entrepreneurship

– High-growth and growing companies

• Goals– economic indicators (e.g., inflation rate, unemployment rate)– Measured “output” indicators in the U.S. at national, state (50 states), and city level (40

largest metros)

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Startup Activity• Rate of New Entrepreneurs

– % adults starting new business (incorporated or unincorporated, employer or not)

• Opportunity Share of New Entrepreneurs– % of opportunity-driven new entrepreneurs (proxy – not

previously unemployed)• Startup Density

– New (Age 0) employer firms by pop

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Main Street Entrepreneurship• Rate of Business Owners

– % of adults who own a business, with our without employees, incorporated or not

• Established Small Business Density– Local, established (5+ years of age) small (<50 employees) business

• Survival Rates– % of firms becoming established (5+ years)

• to be added next edition

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Growth Entrepreneurship• Startup Growth Rate

– Average growth 5y after founding of all surviving firms, employment• Share of Scale Ups

– Firms that become medium or larger (50+ employees) by 5y after founding• High-Growth Business Density

– Firms with 20% growth over 3y per pop

To be released next month

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What it looks like

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2) Practice and Policy ApplicationsIn the last year, since we moved one indicator (Kauffman Index of Entrepreneurial Activity) to more nuance and more local data

• Local government, entrepreneurship support organizations, economic development agencies– Benchmark not only against other areas, but your own area in the past

• Federal government agencies, Senate, Congress, state government and governors– Business owners demographics

• Business intelligence– Intuit, Staples, Square (IPO)

• Popular discourse/media– E.g., New York Times, Wall Street Journal, The Economist, Bloomberg, USA Today, CNBC, etc.

• Discussing targeted policy– Policy Map, by Jason Wiens

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Entrepreneurship Policy Mapintroduced this weekend at South by Southwest interactive

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3) Measuring Your Entrepreneurial Ecosystem – a look at Ingredients

• Density• Fluidity• Connectivity• Diversity

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Entrepreneurial Density• Number of new & young companies: by population

• Employment share of young companies

• High-tech startup density

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Entrepreneurial Fluidity• Population “flux”– Inflow and outflow of people– Brain Circulation more relevant than Brain Drain

• With people with the un-matched skills are staying, that is bad for them and for your ecosystem

• Labor market velocity– Movement (“reallocation”) between jobs and companies

• High-growth firm presence

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Entrepreneurial Connectivity• Program mapping

• Spinoff rate

• “Dealmaker” network

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Entrepreneurial Diversity• Number of “specializations”

• Social and economic (income) mobility

• Outsiders

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4) Data + Resources• For data sources– To be posted at www.growthology.org

• For blank policy map and ideas– www.kauffman.org/policymap

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Challenges• “More entrepreneurship is better” assumption

– “more is better” (especially young and growing) is an useful heuristics, but at least conceptually not always true

• Data lags– Nowcasting?

• Inside city (e.g., street level) missing

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What are we missing?• What’s missing on the framework?• Which ingredients connect to which “output”

indicators?• How to get more granular (e.g., interventions that

affect ingredients?)• What are you doing in your region?

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Thank youFour Takeaways

1. Framework for making sense of complexity2. Public and private applications3. Ingredients for a vibrate ecosystem4. Data and policy discussion resources

• Arnobio Morelix– @arnobiomorelix (Twitter)– amorelix@kauffman.org – www.growthology.org (entrepreneurship research blog)– www.kauffmanindex.org

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