U.S. Entrepreneurship Activity Taxes Hit in 2001, Report Shows

Interest by would-be entrepreneurs to start new businesses declined in 2001 as the economic recession and lingering effects of the dot.com crash dampened enthusiasm for launching new ventures, according to the Global Entrepreneurship Monitor (GEM) 2001 National Entrepreneurship Assessment for the United States of America. The trend is expected to continue for the near term with a strong rebound later in the year.

Conducted by Babson College and the Kauffman Center for Entrepreneurial Leadership, the U.S. GEM study shows entrepreneurial activity in the U.S. last year plunged 30 percent to 11.7 percent of adults from 16.7 percent in 2000. The measurement reflects the percentage of the U.S. adult population involved in the start-up process or in a business less than four years old.

Enthusiasm to take the entrepreneurial plunge fell even sharper, with little more than one out of every three adults (35 percent) believing that good opportunities will develop over the next six months. This compares to one out of every two adults (52 percent) in 2000 and 57 percent in 1999.

Although the United States appears to have temporarily lost some of its entrepreneurial enthusiasm, informal angel investment in the U.S. remained strong, amounting to $129.2 billion in 2001. The U.S. GEM authors/researchers point to several positive findings that bode well for a strong rebound in entrepreneurship activity, including the following strengths:

• A large percentage of older entrepreneurs (age 45 to 64) translates into deeper industry experience, large networks and greater personal capital for fueling high potential ventures.
• A high ratio of women to men involved in entrepreneurial activities signals broad-based participation in economy-building entrepreneurial processes.
• A positive perception that the government is supportive of entrepreneurship and that current government regulations are not too burdensome foments a belief that there are few roadblocks to venture creation and growth.
• A training and educational infrastructure fosters creativity, self-sufficiency and personal initiative, as well as explicitly
  
  teaches entrepreneurship.
• Cultural and social norms support self sufficiency. And,
• Sufficient equity and debt financing exists to launch and grow new ventures, despite certain "capital gaps."

The U.S. GEM research is an expansion of the inaugural 1999 overall GEM report, which analyzed entrepreneurial activity in 10 countries to determine the complex relationship between entrepreneurship and economic growth. The scope of the project tripled for 2001, with research teams from 29 countries participating.

The 2001 U.S. GEM report is available under Reports and Journal Reprints at the Kauffman Center for Entrepreneurial

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