U.S. Entrepreneurial Activity Healthier than Rest of the World, but Hitches Remain

This article has been written by Sanskrity Sinha for IBTimes, published on Nov. 25, 2011.

With a minimal 2 percent increase in established businesses and a persistent rate of opportunity-driven ventures, the entrepreneurial scenario of the United States was still healthier than rest of the world in 2010. However, a small decline in early-stage entrepreneurial prevalence depicts the downside, according to a recent study by Global Entrepreneurship Monitor (GEM).

The start-up entrepreneurial ventures in U.S. dropped from 8.0 percent in 2009 to 7.7 per cent in 2010, said GEM in its report on the National Entrepreneurial Assessment for the USA, published on Nov. 14.

Although having a high Total Early-Stage Entrepreneurial Activity (TEA) among the innovation driven economies, the United States had the highest discontinuance rate. According to GEM findings, financial difficulties, unprofitable businesses and problems getting finance were the most common reasons for discontinuing a business.

Timothy Sykes, a 30-year-old New York-based trader, says how he had to shut down his hedge fund, Cilantro Fund Management LLC, after he suffered a loss of 35 percent of its value. However, opportunity drove Sykes to venture into new business.

"My hedge fund investors weren't clamoring for their money back; I simply recognized greater opportunity so I took advantage," Sykes told IBTimes. He founded a publishing company called Millionaire Media that aims at educating the public on how to make money in various industries like the stock market and internet marketing through materials taught by actual millionaires.

However, it was in the year 2007 when Sykes went after opportunity. The recent scenario depicted by GEM report reveals that necessity-driven entrepreneurship is driving U.S. young entrepreneurs and there has been a drop in the rates of opportunity-driven ventures, even as the total percentage of opportunity-driven entrepreneurs remains higher.

Matt Wilson, 25, of New York who co-founded Under30CEO, which provides resources, advice and online marketing services to aspiring young entrepreneurs, says his company was born out of necessity.

"When I graduated, I realized the lack of entrepreneurial resources for my generation and we decided to build them online at the global level."

"Students are no longer being handed a job when they are handed their diplomas and are looking for new opportunities. Graduates that would have normally looked to work on Wall Street are now looking to start their own ventures and are looking for the knowledge and know-how," he said.

Another key finding of the U.S. entrepreneurial assessment report hints at growing commitment to social entrepreneurship, which strengthens economic model.

"As an entrepreneur, you have to make money, but I believe that my social model has been instrumental in improving my economic model," says Alex Hodara, owner of Hodara Real Estate Group that sells multifamily investment properties around the Boston area.

Hodara's company donates $50 per deal to One Year for Cancer, Inc. ever since their first rental deals. Their donation of $1,000 to BU's Habitat for Humanity brought in many customers, he explained.

Hodara, 24, further started a reality show called "Making Moves" to help people follow their dreams. The social impact of the show paid off when an investor who read about it ended up buying $3 million in real estate investments, he added.

Other brighter sides of entrepreneurial activity in the U.S. showed the country emerge as world leader in innovation with an increase in innovation-driven ventures by 8.3 percent last year. The report finding suggests that opportunity-driven entrepreneurs are more innovative than necessity-driven entrepreneurs.

Hodara, who started his rental company after being a real estate agent in Boston during his first two years of college, says that real estate brokerages have an awful reputation in Boston.

"People think of agents as pushy and cut throat. I saw an opportunity to change that, so I started a real estate brokerage run entirely by students," he said.

Hodara's innovative approach towards an opportunity eventually helped his company become the "First Student-run Real Estate Brokerage in America."

The long-standing economic gloom in the United States had its due effect on entrepreneurial activity in 2010, but entrepreneurs believe that the entrepreneurial spirit is deeply ingrained in Americans' thoughts; though they see competitions from around the world in future.

"Newer technologies and the Internet allow driven individuals from anywhere in the world to start businesses cheaper and faster now than ever before. As this reality becomes more widely known, the U.S. will continue losing market share as people from all over the world become entrepreneurs," said Sykes.

However, the fact that U.S. entrepreneurial activity is currently healthier than most of the countries, gives a boost to their hopes of "explosive" growth, profit and expansion plans even around a looming economy.

"I project we will grow from selling investment property to investing and developing deals ourselves; soon we will be making moves all over the world" Hodara said.


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