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It has been a laggard recovery thus far, but the economic outlook shows interesting potential. A combination of developments in technology, financing and corporate culture is behind the rising power and leverage of small companies. As a result, an increasingly diverse cross-section of individuals is leaving large organizations and pursuing the creation of their own businesses.
The general population now has access to affordable computing and treasure troves of information and data via the Internet; new business owners can network their smart phones, touch-screen tablets and inexpensive printers, and leverage low cost storage. Online software tools and services allow entrepreneurs to maximize their capabilities and mask their size, giving their new ventures greater reach and scope.
It has been a double strike against large organizations. Large companies, with their complex integrated systems, are struggling to keep up with the pace of technology developments and finding it hard to respond quickly to meet business demands. In contrast, empowered entrepreneurs can adapt and execute fast, expanding nimbly at co-working spaces and benefiting from the increasing pool of flexible talent.
Also, funding options for entrepreneurs have increased through innovation and expanded investment parameters. The general public can now contribute directly through donation-based crowd funding; equity crowd funding for accredited investors is becoming a viable source of seed capital; incubators, angel groups and accelerators have multiplied over the past decade, and many large corporations invest in innovation through industry-relevant venture funding. Home equity has returned as a key source of business financing as the housing market improves.
In 2013, venture capitalists invested $29.4 billion in 3,995 deals, up 7% in dollars and 4% in deals from a year earlier – total funds invested increasing at all stages of development, according to the MoneyTree Report by PwC and the National Venture Capital Association.
Work culture has also changed. To be successful, a holistic culture – value-based and flexible – is becoming a critical component of the evolving work environment in order to attract and retain top talent. Taking an integrated approach to solving the challenging ‘work-life’ balance, this is emerging as an important component of a successful business plan and sustainable growth model.
Millennials have been the most vocal group so far emphasizing these cultural changes with London Business Schools’ soon-to-be released study, indicating that millennials are actively seeking more flexibility, control and purpose at work. This generational group is forecast by the Society for Human Resource Management to be almost half (46%) the workforce by 2020, so successful growth plans necessitate addressing these needs.
The confluence of these developments is encouraging and supporting the rise of a larger, more diverse and dispersed group of entrepreneurs. According to the Kauffman Index of Entrepreneurial Activity 1996-2013, 45- to 64-year-olds’ share of new business activity rose 22% to 53.4% from 2003 to 2013; Hispanic-owned new enterprises increased from a 16% share to more than 20% during the same period; entrepreneurship-focused education and training programs are catalyzing business launches in St. Louis, the Midwest, Florida and Ohio, not traditionally entrepreneurial hubs.
Meanwhile, there is more support for women entrepreneurs. The Gender Global Entrepreneurship Development Index ranks the US first, ahead of 16 other countries, for fostering high potential female entrepreneurship. While only 15.9% of women entrepreneurs sought angel investments in the first half of 2013, the acceptance rate was 23.6% — higher than the overall market’s 21.5%, according to the Center for Venture Research’s summary of the Angel Investor Market Q1Q2 2013 This suggests that programs helping women get “investor ready” are yielding results.
Entrepreneurs now have a toolbox replete with real and virtual tools and complemented by increasing emotional and environmental support to facilitate their ideas, journeys and successes. Quintessentially American, entrepreneurs of all kinds are seizing the day.
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