Maine fell four places to land at 20th among the 25 smaller states in the latest Kauffman Index, an annual report that measures startup business activity. Maine tied with Vermont and Utah for largest year-over-year decline in ranking among smaller states.
The report divides the nation into the 25 larger and smaller states for purposes of analysis. To develop its rankings, Kauffman examined three factors: the rate of new entrepreneurs, the “opportunity share” of new entrepreneurs, and startup density.
The rate of entrepreneurs is measured by the number of people starting businesses per month out of every 100,000 adults in a given state.
The opportunity share of new entrepreneurs gauges the percentage of entrepreneurs who already were employed but started a business because they saw opportunity in a particular industry.
Startup density measures the number of startups (new businesses) per 1,000 employers in a given state. It only counts businesses that employ at least one person besides the company’s owner.
In Maine, the rate of new entrepreneurs remained flat from 2014 to 2015 at 0.29 percent (rates ranged from 0.18 percent to 0.50 percent). In other words, an average of 290 Mainers started a business each month out of every 100,000 residents in both 2014 and 2015.
The areas in which Maine declined in 2015 were opportunity share and startup density.
In 2015, the opportunity share of new entrepreneurs was 77.68 percent, down from 80.43 percent in 2014 (percentages ranged from 71.32 percent to 90.84 percent). In other words, the share of new businesses started by entrepreneurs who already had jobs fell by about 3.4 percent.
Maine’s startup density fell from an average of 64.2 startups per 1,000 employers in 2014 to 60.7 startups per 1,000 employers in 2015, a drop of 5.5 percent. Rates in this category ranged from 51.1 to 107.4.
Promoters of Maine’s entrepreneurial community have long argued that studies such as the one conducted by Kauffman fail to capture a significant chunk of Maine’s startup activity because so many of the state’s startups are one-person operations.
Still, some entrepreneurs in Maine noted that Kauffman’s apples-to-apples comparison between 2014 and 2015 still reveals a disturbing decline in entrepreneurial activity in Maine during a period of general economic recovery.
Sam Kelley, a serial entrepreneur and owner of MBI Trailers in Scarborough, questioned the effectiveness of the many organizations promoting entrepreneurship in Maine after reading the Kauffman report. Kelley said Maine’s declining numbers are proof that a more coordinated effort is needed to encourage startup formation and help new businesses thrive.
“There are (dozens of) different organizations working on exactly this thing, just in Portland alone, but they don’t work together on anything,” he said. “It just doesn’t seem to be working.”
In 2015, Maine outperformed only Kentucky, Connecticut, Iowa, New Hampshire and West Virginia on the list of smaller states.
The five top-ranked smaller states were Montana, Nevada, Wyoming, Oklahoma and Alaska. Among the larger states, the top five were Texas, Florida, California, New York and Colorado, while the bottom five were Minnesota, Indiana, Alabama, Pennsylvania and Wisconsin.
Bryan Whitney, president of the Maine Technology Institute, which offers grants and other assistance to startups in Maine, said he is not overly concerned about the Kauffman Index report. He said that while it measures startup formation, the real growth in Maine’s entrepreneurial sector has been with existing startups that have experienced job and revenue growth.
Whitney also mentioned several positive developments in Maine that he said will help promote and fund startups even further, including a three-year investment from pro-startup nonprofit the Blackstone Foundation that has allowed MTI to create Maine Accelerates Growth, “a collaborative and complementary network of organizational partners who are working together to achieve a vision of accelerating the growth of companies, communities and talent.”
“Despite Kauffman’s numbers, I know well that there is great momentum in Maine’s startup community as evidenced by record numbers of MTI funding applications from entrepreneurs across Maine,” Whitney said.
©2016 the Portland Press Herald (Portland, Maine) Distributed by Tribune Content Agency, LLC.
