MN Ranks Dead Last in Entrepreneur Report

In a new report, Minnesota fared poorly with respect to the proportion of adults who started a new business in 2012; a nationwide lull in new-business activity, however, appears tied to an improvement in the overall economy.

There was a “substantial vacation” in U.S. entrepreneurial activity last year—but nowhere was it as pronounced as in Minnesota.

That’s according to The Kauffman Index of Entrepreneurial Activity, a report compiled by the Kansas City, Missouri-based Ewing Marion Kauffman Foundation. The study essentially defines entrepreneurial activity as being tied to the launch of new businesses, and it is meant to serve as an indicator of business-creation activity across the United States.

The report found that there was a national lull in entrepreneurship in 2012, when roughly 514,000 entrepreneurs opened new businesses each month, down from 543,000 in 2011.

The report defines entrepreneurial activity based on how many adults per 100,000 residents started a new business each month during the year. Minnesota fared the worst, with only about 150 out of 100,000 residents opening businesses on a monthly basis.

Montana, by contrast, topped the list with 530 per 100,000 adults creating new businesses each month.

Rounding out the top five states for entrepreneurial activity are Vermont (520 per 100,000 adults), New Mexico (520), Alaska (430), and Mississippi (430).

Bringing up the rear along with Minnesota are Ohio (190 per 100,000 adults), Wisconsin (180), Michigan (180), and Nebraska (170).

To view the complete report, click here.

The report largely attributed the national decline in entrepreneurship to a decrease in activity by men. The rate among women held steady. Meanwhile, entrepreneurship rates for all races and ethnicities declined from 2011 to 2012.

The study points out, however, that perhaps fewer entrepreneurs are branching out to launch their own businesses because the economy is improving. In other words, many people start their own businesses out of necessity, when the economy is poor and jobs are scarce.

“It’s likely not a coincidence that the number of new businesses created dropped when the economy improved last year,” Dane Stangler, director of research at the Ewing Marion Kauffman Foundation, said in a statement. “During the Great Recession when the labor market was at its weakest, business creation rates rose to record highs. The 2012 rates are a return to longer-term levels.”

That might at least partially explain Minnesota’s ranking in the study: The state’s economy has outpaced national averages with respect to unemployment. In March, Minnesota’s jobless rate was 5.4 percent, compared to the U.S. rate of 7.6 percent.

Also, new-business creation is only one way to measure entrepreneurial activity, and it is not indicative of individual businesses’ successes.

Still, a lack of Minnesota entrepreneurship runs counter to the narrative touted by many other organizations, both locally and nationally. For example, tech giant Google, Inc., recently announced plans to sponsor two years’ worth of entrepreneur events at Twin Cities “co-working” firm CoCo. Google leaders, including Chairman Erik Schmidt have lauded the local culture of entrepreneurship.