Kauffman Index Shows Philly Startup Economy Has Much Room to Grow

The region dropped two spots from last year's ranking in the newly released 2017 Kauffman Index of Startup Activity. Here's why.

Photo by J. Fusco for Visit Philadelphia™

According to Kauffman’s 2017 Startup Activity Index, the Philadelphia-Camden-Wilmington metro area is in a bit of a lull when it comes to new business creation activity.

Dropping two spots from last year’s ranking, the region took the 36th ranking out of 40 spots, coming in just behind Baltimore and a few spots ahead of Pittsburgh, which ranked last.

The list, topped off by Miami, Austin, and Los Angeles, was compiled using three distinct measurements for each metro area. The first – the rate of new entrepreneurs – represents a percentage of adults in the area that are entering entrepreneurship at a given point in time. The second measure, opportunity share of new entrepreneurs, evaluates the percentage of people entering entrepreneurship out of “opportunity” rather than out of “necessity.” And startup density, the final measure, looks at the number of new employer businesses normalized by population.

The Greater Philadelphia area’s rate of new entrepreneurs dropped from .22 percent to .21 percent in 2017, a negligible difference in comparison to the overall trend within the past decade. Before 2012, the area’s rate of new entrepreneurs remained consistently below .20 percent, but it has not dipped below that threshold in the past five years.

Opportunity share and startup density in the region have both fluctuated in the past years. For 2017, Philly’s opportunity share stands at 76 percent, with a startup density score of 70. For comparison, Austin, which dropped down to spot number two this year, experienced a rate of 51 percent for new entrepreneurs, an 85 percent opportunity share and a score of 105 for startup density.

Overall, startup activity for 2017 across all 40 metro areas is almost as strong as startup activity just before the Great Recession drop. In 2013, the Startup Activity Index was at its lowest point in 20 years, but has steadily increased since then. To view an interactive version of the report click here.

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