Who Started New Businesses in 2013?

Although the United States’ economic upturn remains modest, two indicators from the second annual Kauffman Foundation/LegalZoom survey of entrepreneurs indicated greater confidence in 2013.

Small business owners reported lenders providing increased access to credit over the last 12 months, and a greater willingness from the entrepreneurs themselves to put personal savings toward new business ventures.

In the survey, titled “Who Started New Businesses in 2013”, and conducted with companies recently formed using LegalZoom, perhaps the strongest evidence of an improving economy is the survey’s operational findings.

Thirty-seven percent of new business owners said they had encountered no difficulties in forming or running their companies, a 3 percentage point decrease from 2012.

However, of those who did cite difficulties, 36 percent listed unpredictability and 28 percent named lack of access to credit – down a whopping 19 and 17 percentage points, respectively, from 2012.

Another encouraging sign was founders’ increased use of personal savings to start their businesses, which may indicate a broader economy-wide shift from savings to investment.

Personal savings as a means for funding the startup jumped from 66 percent in 2012 to 86 percent in 2013.

Other funding sources included credit cards at 16 percent (10 percent in 2012), retirement savings at 8.5 percent (6.5 percent in 2012) and bank or home equity loans at 6.5 percent (4.5 percent in 2012).

Survey findings also showed that businesses with one to four employees increased from 25 percent in 2012 to 26.5 percent in 2013. Twelve percent of the respondents – whose nascent ventures naturally are small – had revenues above $100,000, a 4 percentage point increase over 2012.

Further, startups with revenue below $50,000 dropped from 82 percent in 2012 to 77.5 percent in the most recent survey.

The higher number of female founders (35 percent, a 4 percentage point increase over 2012) in the most recent survey also hints at a wider economic recovery. More female entrepreneurs may mean that fewer men are leaving salaried work, or that more men are going back to it.

Overall, the survey showed nominal shifts in age composition of the sample between 2012 and 2013, with slightly fewer entrepreneurs aged 18-29 and 50-59, and slightly more aged 30-39 and 60+.

In 2012, 44.7 percent of respondents had previously started businesses, as compared to 41.4 percent in 2013. Among those who had previously started a business, entrepreneurs who had started more than one other company dropped from 52 percent to 48 percent.