Chart: The top states for entrepreneurship (Oregon and Washington aren’t even close)

topstates-entrepreneurial

Washington and Oregon are at the bottom when it comes to new business formation.

We like to think of ourselves from entrepreneurial stock here in the Pacific Northwest — driven by by a pioneering spirit that led people westward hundreds of years ago and instilled values that led to industry giants such as Boeing, Nike, Starbucks and Microsoft.

entrepreneurs777But that might not really be the case. According to the annual Kauffman Index of Entrepreneurial Activity, Oregon and Washington ranked near the bottom of the entrepreneurship ladder, even though most other Western states ranked high.

Washington had just 170 entrepreneurs per 100,000 people, while Oregon had 210 per 100,000. That compares to Colorado — 380 entrepreneurs per 100,000 — and California — 400 entrepreneurs per 100,000.

Only Iowa, Rhode Island, Indiana and Minnesota ranked lower than Washington in terms of number of entrepreneurs. The top states for entrepreneurship: Montana, Alaska, South Dakota and California. Nationally, 280 adults per 100,000 are entrepreneurs, defined as those who run a business as their main job.

The results of the study — which showed an overall decline in new business formation as the economy improved — are somewhat baffling. We’ve reached out to the authors of the report for a deeper explanation, and we’ll update this report when we hear back.

One of the theories: Most of the entrepreneurial activity is centered around big cities. But Seattle too ranks low in the report, with just 220 entrepreneurs per 100,000 people. That was third lowest of the major cities, behind Philadelphia (180) and Chicago (200).

San Francisco led the way in terms of entrepreneurs with 570 per 100,000 adults.

entrepreneurs77777

Maybe Oregonians and Washingtonians are just focused on building a smaller number of impactful businesses, something that Washington Gov. Jay Inslee hinted at when speaking at GeekWire’s Startup Day last year. He coined a new term: innovation per dollar.

“I believe we lead the world in IPD right here in the state of Washington,” Inslee said. “It’s throughout our geekdom — it’s in aerospace, in energy, in transportation, in software, in the gaming industry.”

The study also gives weight to arguments made by some venture capitalists who’ve suggested the entrepreneurial crop is just weaker in Seattle than other spots. It also connects directly with a discussion we had last weekend on the GeekWire podcast with University of Washington history professor Margaret O’Mara, who discussed the ingredients that make up an innovation hub.

Looking over these results, one has to ask: Are we an entrepreneurial culture or not?

Full report here.

UPDATE: Here is the explanation on why Oregon and Washington state has such a low entrepreneurship rate from Jared Konczal:

While the overall rate has dropped, there is a greater share of “opportunity” entrepreneurs nationwide. It’s likely that improving labor market conditions are putting less pressure on individuals to start their own business. Referencing back to your post’s opening, established companies like Boeing, Nike, Starbucks and Microsoft and even those less well-known have both direct and indirect effects on the region’s entrepreneurial activity. For example, perhaps Microsoft isn’t directly on a hiring spree or otherwise retaining employees that would be entrepreneurs, but the construction company Microsoft contracts for its new buildings is able to provide gainful employment and thus its employees aren’t pushed to start up their own operation elsewhere. There are spillover effects even if the companies are not directly engaged in hiring.

  • Jeff Unze

    I think the easiest explanation here is that the Pacific Northwest has fewer people who start businesses out of necessity. New Mexico for example doesn’t have a Microsoft or Nike if you are an intelligent person and you don’t work at a lab often your only choice is starting your own company. California’s great businesses don’t crowd out entrepreneurs due to the incestuous nature of the Silicon Valley and abundance of VC.