Where have all the entrepreneurs gone

Far fewer young people are starting companies in the US.

Entrepreneurship among the younger generation in the US is not exactly flourishing – on the contrary, according to Techonomy.

The publication cites a Wall Street Journal article that says young US entrepreneurs are an endangered species. In 2013, only 3.6% of households headed by young adults under 30 years of age had stakes in private companies. The percentage is all the more telling when you compare it with 1989, when it stood at 10.6%. The Kauffman Foundation also confirms that entrepreneurship hit a 17-year low in 2013 among individuals aged 20 to 34.

The falloff in entrepreneurship is not confined to the young. Between 1978 and 2011, the overall startup rate fell by half. And while 562,000 new firms were formed in 2006, only 400,000 emerged in 2010 and 2011 -- a number that has not changed since.

Techonomy offers five possible reasons for the decline in entrepreneurship among the young.

Financial weakness.
The financial crisis left younger households much more fragile. Their average net worth was cut by 48% to US$44,354 between 2007 and 2014. When you have less capital available, you are less inclined to start a business.

Increased indebtedness. In 2013, 69% of grads with student loans were left with a debt of US$28,400.

Consolidation. Today’s startups have to compete with firms in all sectors that have been consolidating, creating integrated groups with cost advantages. That could further inhibit the entrepreneurial urge.

The Internet standard. In earlier days, competition was mostly local. Now, the Internet raises the standard and forces players in many business sectors to be world-class from the start.

Fear of failure. In 2014, a full 41% of 25-to-34-year-old survey respondents said fear of failure was the biggest factor in preventing them from starting a business. In 2001, that figure was only 24%.