Zeroing in on Who’s Behind Today’s Newest Startups

While the government has long served as the primary source for entrepreneurship research, it’s also known for providing numbers that are months or even years old, making it tough for anyone to get a real read on who America’s startup entrepreneurs are at any given time. Not only is outdated research unhelpful to policymakers—especially when the country is trying to recover from the greatest economic crisis since the Great Depression—but it’s also not terribly inspiring to prospective startup entrepreneurs, many of whom may be wondering if now is the time to take the startup plunge.

In an effort to gather some more enlightening and current data on the subject, LegalZoom has partnered with the Kauffman Foundation to survey more than 1,400 individuals who have started businesses in the past year. The result is the newly released Startup Environment Index 2012.

startup environment index 2012

This current barometer of startup activity provides a thumbnail sketch of today’s early-stage business owners across a number of critical factors, including gender, age, experience, education, size, funding, timing and bifurcation, as well as their most pressing concerns. Here’s a rundown of the Startup Index’s key findings:

Gender—In keeping with prior research on this subject, women are at the helm of roughly a third of new startup companies, with the male-female ratio skewed toward males when it comes to companies with higher revenues. A bright spot? A higher concentration of entrepreneurs among young women between the ages of 18 and 29 may represent a step toward greater diversity across the entrepreneurship spectrum. You go, girls!

Age—Roughly half of startup business owners are between the ages of 30 and 49, with the other half distributed across the other three categories of 50-59 (21%), 18-29 (18%) and 60+ (12%). Where women are more highly represented in the 18-29 and 50-59 categories, men (relative to the total sample) have greater representation in the other age ranges.

Experience—Well over half of startup owners report having at least six years of prior industry or work experience, while 44% of them have started a company before. A little over half of those who owned companies before have actually started more than one.

Education—On average, male startup business owners are less educated than their female counterparts. Overall, just over 60% of respondents had a Bachelor’s Degree of higher, while 28% had some college or trade, technical or other vocational training. Roughly 10% of startup founders had no more than a high-school education.

Size—Seventy percent of startup owners report that they have no employees other than themselves, while roughly 25% of them have between one and four employees (both full- and part-time). Eighty-two percent of startups reported revenues of $50,000 or less, while 8% had more than $100,000 (including 18 with $1 million or more).

Funding—Startup entrepreneurs today report a relatively small range of funding sources, with personal funds and savings accounting for two-thirds of this category (the largest chunk). Ten percent used credit cards, and 6% borrowed against their retirement. Another 6% secured startup funding from outside investors, 5% got loans from family members and 4 percent got a bank or home equity loan.

Timing—One caveat to the Startup Index’s findings is that it only accounts for new businesses that were officially formed as legal entities in 2012. Given that more than one-third of respondents said they spent more than a year (and in some cases more than three) working on their startup venture before taking the final leap, there is much that is certainly unaccounted for in the way of current entrepreneurial activity at any given time. Just 9% of startup business owners report that it took them a month or less to legally form their business.

Bifurcation—A state-by-state breakdown of startup owners reveals that many of them reported two states for business location and state incorporation, with Delaware, Nevada and Wyoming being the three most common states for bifurcation.

Concerns—While most of the respondents in this survey reported facing no policy or regulatory barriers to business startup, those that did said the uncertainty surrounding today’s economic and political climate is their greatest concern. Taxes were also cited as a burden by many business owners, while licensing regulations were another issue of note.

For a look at the complete findings from the Startup Environment Index 2012, click here now!

Are you a startup entrepreneur? If so, who are you, what are you all about and what’s your startup story? Are you thinking about buying a business opportunity, small franchise or into some other existing business model? If so, what are your startup funding options? What are your greatest concerns and why? We’d like to hear from you…