Emails, Lacey B. Graverson, senior creative services specialist, Communications, Kauffman Foundation, May 5 and 10, 2016
From: Selby, Gardner (CMG-Austin)
Sent: Thursday, May 05, 2016 1:04 PM
To: Lacey Graverson
Subject: RE: Urgent inquiry, Texas reporter
I noticed this in the 2015 report and might want to explain how it was calculated:
According to the analysis, 0.55 percent of adults in the Austin area, which runs from Round Rock south into San Marcos, became entrepreneurs in any given month of the year-long period. More to Adler’s point, perhaps, the Austin area had 180.8 start-up firms per 100,000 residents in the period, the foundation says, defining start-ups as “firms less than one-year old employing at least one person besides the owner.”
1:56 p.m.
Thank you for reaching out. I contacted one of the authors of that report and received the below.
In the 2015 Kauffman Index of Startup Activity, Austin was indeed ranked number one in the U.S. among the forty largest metropolitan areas by population in the U.S. (and, thus, also the #1 among all Texas metropolitan areas within the top 40 largest in the country.)
You can see an interactive data profile in Austin here. You can also see the full list of metro rankings for Startup Activity here.
Here is how the Index is calculated:
The Kauffman Index: Startup Activity provides a broad index measure of business startup activity in the United States. It is an equally weighted index of three normalized measures of startup activity. The three component measures of the Startup Activity Index are:
i) The Rate of New Entrepreneurs in the economy, calculated as the percentage of adults becoming entrepreneurs in a given month.
ii) The Opportunity Share of New Entrepreneurs, calculated as the percentage of new entrepreneurs driven primarily by “opportunity” vs. “necessity.”
iii) The Startup Density of a region, measured as the number of new employer businesses normalized by population.
On data sources:
- For the Rate of New Entrepreneurs and the Opportunity Share of New Entrepreneurs our data source is the Current Population Survey (CPS), from the Bureau of Labor Statistics (BLS). This is the same source the BLS uses in the monthly ‘jobs report’.
- For the Startup Density, we use one firm-level dataset (to calculate the number of startups) and one population-level dataset (to calculate the number of residents in an area). The firm-level dataset is the Business Dynamics Statistics (BDS) from the Census Bureau (a dataset Kauffman helped fund). The BDS covers all employer businesses in the U.S. (about 5 million of them), and is aggregated based on IRS tax records. The population-level dataset comes from the Bureau of Economic analysis.
Below is a little more detail on each indicator, but you can also see the full methodology available on this report.
Thank you,
Lacey B. Graverson
Senior Creative Services Specialist | Communications
Ewing Marion Kauffman Foundation
Kansas City, MO
12:47 p.m.
May 10, 2016
The Kauffman Index: Startup Activity isn’t a count of the number of startups, it takes into account all three of the below components when establishing rank.
The Kauffman Index: Startup Activity provides a broad index measure of business startup activity in the United States. It is an equally weighted index of three normalized measures of startup activity. The three component measures of the Startup Activity Index are:
i) The Rate of New Entrepreneurs in the economy, calculated as the percentage of adults becoming entrepreneurs in a given month.
ii) The Opportunity Share of New Entrepreneurs, calculated as the percentage of new entrepreneurs driven primarily by “opportunity” vs. “necessity.”
iii) The Startup Density of a region, measured as the number of new employer businesses normalized by population.
Thank you,
Lacey B. Graverson
Senior Creative Services Specialist | Communications
Ewing Marion Kauffman Foundation