California prides itself on being the nation’s most entrepreneurial state.
Yes, in numerous industries, from technology to entertainment to fashion, the Golden State is a well-documented leader in cutting-edge business. But what about entrepreneurship at a more basic level: simply starting a business?
My trusty spreadsheet analyzed one attempt to measure new enterprises across America: a curious Census dataset that estimates how many businesses with employees are being formed in the 50 states and the District of Columbia dating to 2004.
After California came its economic arch-rivals: Texas at 35,300 and Florida at 32,400. Then came New York at 21,600 and North Carolina at 11,500.
At the other end of the entrepreneurial spectrum, the slowest formation pace was found in the District of Columbia at 600, Hawaii and Vermont at 700, North Dakota at 800, and Rhode Island at 1,000.
This big count matters when you think about the long-shot odds that today’s start-up is a future corporate giant. So, if nothing else, California enjoys the most lottery tickets where the prize might be the next Walt Disney Co., Apple Computer, Nvidia, etc.
What’s the pace?
California bosses often complain about how hard and costly it is to run a Golden State business. That may scare off folks thinking about something new.
Perhaps those anxieties help explain modest growth in this yardstick of California entrepreneurship.
California’s formations last year were 20% above the average statewide pace over the 22 years of this business-start data. Yet that expansion ranked only No. 30 among the states and trailed the nation’s 29% growth.
The fastest growers were small states, Wyoming, up 168% and Delaware, up 111%. Next came more populous states: Texas at 56%, Tennessee at 55%, and Arizona at 50%. And Florida was No. 19 at 33%. So being big didn’t preclude fancy growth.
Note that growth wasn’t universal. Three states are below average: Hawaii, off 20%, and Rhode Island and Nebraska, off 1%. And North Dakota was flat.
How common?
Consider another way to measure entrepreneurial spirit: formations as a share of existing business establishments, a Bureau of Labor Statistics measure.
California doesn’t score well on the scorecard, either. Its latest business starts equal 2.5% of its current establishments. That’s below par, ranking No. 29 among the states and trailing the nation’s 2.9% rate.
Most entrepreneurial, by this math? Wyoming, with formations equal to 9.3% of its establishments, Delaware at 5.4%, Alaska at 4.2%, and Texas and Washington state at 4.1%. Florida was No. 8 at 3.7%.
And where is new business rare? Hawaii, with formations equal to 1% of its establishments; the District of Columbia at 1.1%; West Virginia and Louisiana at 1.9%; and Rhode Island at 2%.
Let’s politely say that Californians may start the most businesses, but others are catching up.
Another grade
Earlier this year, the financial website WalletHub graded states on their business-start climate using a collection of 25 metrics. California ranked 10th best. Not shabby.
But note that WalletHub’s top spots for entrepreneurship include some big Golden State competitors: Florida ranked No. 1, followed by Utah, Texas, Oklahoma, and Idaho.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
ICYMI:Here are the Southern California News Group’s most-popular real estate news stories for October:
No. 1: Dana Point’s Ritz-Carlton sells for estimated $600 million
No. 2: Laguna Beach estate sells for $82.6 million, second-highest OC home sale
No. 3: Newport Beach’s 100-year-old landmark Lovell Beach House seeks $18.8 million
No. 4: Southern California homebuying crashes to 2nd slowest pace on record
No. 5: ‘New Girl’ star Jake Johnson lists Pasadena home for $3.3 million
No. 6: 12 Orange County ZIPs on costliest housing list, 3rd most in nation
No. 7: Palos Verdes Estates oceanfront compound sells for record $24.3 million
No. 8: Home prices drop in 42% of Orange County
No. 9: Long Beach mid-century duplex photographed by Julius Shulman seeks $1.5 million
No. 10: Gains in California home prices continue to evaporate
No. 11: Real estate news: Costa Mesa apartment complex fetches $9.4 million
No. 12: Real estate news: Placentia shopping center trades hands for $66 million
No. 13: 69 California ZIP codes make priciest-housing list, the most of any state
No. 14: Laguna Beach’s ridge-cresting ‘Wave House’ seeks $7.9 million
No. 15: Rents are rising in 58% of Southern California cities
