Slow to Start?

Wisconsin ranks low in nationwide index of entrepreneurship

V1 Staff

We have some good news and some bad news about Wisconsin’s national rankings for entrepreneurial activity. The good news is that – unlike the previous three years – Wisconsin didn’t place dead last among the states in the Ewing Marion Kauffman Foundation’s 2018 ranking of startup activity. The bad news is that this is only because the Kauffman Foundation – which has produced such rankings for more than 20 years – took the year off in 2018. No rankings means nobody can be worst (or first). The Kansas City-based nonprofit said it didn’t rank states and metro areas last year because of “the availability and timing of some underlying data sources and a new direction for its research strategy.”

Presumably, the retooled Kauffman rankings will be back later in 2019. In the meantime, it’s interesting to examine how Wisconsin has placed in the recent past. Here are some numbers from the 2017 report, with explanations on what they mean:

Wisconsin ranks 50th among all states in 2017 (and 2016 and 2015) on the Kauffman Index of Startup Activity, which is described as “an early indicator of the beginnings of entrepreneurship in the United States, focusing on new business creation, market opportunity, and startup density.” By comparison, Minnesota placed 33rd and Illinois 41st. Upper Midwesterners, it seems are, tentative about staking their claims in the business world. The top states – such as Nevada, California, and Texas – tend to be in the West and South.

Wisconsin also lands in last place among the 25 largest states in the “Opportunity Share of New Entrepreneurs.” That’s the percentage of entrepreneurs who are starting new businesses out of a sense of opportunity rather than because they lost their jobs. “Of course, entrepreneurs coming out of unemployment also can achieve high growth, but Opportunity Share can give us an early indicator of potential,” the foundation says. In Wisconsin, the Opportunity Share was 66%, meaning 34% of entrepreneurs started businesses because they were jobless. By comparison, the Opportunity Share was 92.5% in No. 1 Iowa.

Wisconsin ranks 23rd among the 25 largest states in Growth Entrepreneurship – i.e., the revenue and employment growth of new firms. One component of this ranking is Startup Growth (how much a new business’s number of employees grew over five years). Wisconsin ranked at the bottom in this area with 51% growth, compared with 100 percent growth in Georgia.  Another factor is High-Growth Company Density – the number of fast-growing companies with at least $2 million in annual revenue. There were 39.9 of these firms for ever 100,000 employer businesses in last-place Wisconsin vs. 208 per 100,000 in No. 1 Virginia.

Wisconsin shines in at least one part of Kauffman’s rankings: the Index of Main Street Entrepreneurship, which “measures business ownership and density of established, local small businesses.” On this index, last compiled in 2016, Wisconsin finished second only to Minnesota. Looking at all these statistics can lead to the conclusion that while Wisconsinites may be extremely cautious in making the leap into business ownership, once we do so we are more likely to be in it for the long haul.

Learn more about the Kauffman Index at www.kauffman.org/kauffman-index.

Chippewa Valley Start-Up is sponsored by:

Royal Credit Union
200 Riverfront Terrace
Eau Claire, WI

Chippewa Valley Start-Up is sponsored by:

Royal Credit Union
200 Riverfront Terrace
Eau Claire, WI