According to the 2017 Kauffman Startup Activity Index, the share of new entrepreneurs who started businesses to pursue opportunity rather than from necessity reached 86 percent, more than 12 percentage points higher than in 2009 at the height of the Great Recession. In addition, young businesses enjoyed a three-decade high five-year survival rate of nearly 50 percent.
There is additional encouraging news for aspiring entrepreneurs on many fronts, just in case you are thinking about joining the existing ranks:
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Valuations of successful startups have hit an all-time high. An unprecedented number of startups, almost 200 at last count, are now valued above $1 billion, according to a recent Forbes article. Two of these, Uber and Didi Chuxing, have already passed $50 billion. Thus a record number of entrepreneurs (and team members) are getting rich.
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Initial Public Offerings (IPO) are back as an exit strategy. Bloomberg reports that forty-nine percent more companies went public in 2017 versus 2016. The average amount raised also increased to $175 million. Investors showed an increased appetite for new stocks, with 18 percent of deals pricing above the marketed share price range.
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Funding for early-stage startups is more available than ever. Last year 200,000+ American angels invested an estimated $25 billion in more than 71,000 startup deals. Crowd funding is setting new records worldwide, with an additional $34 billion in 2017, and VCs poured around $150 billion more into private growth companies last year.
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Cost of entry for a startup is at an all-time low. I can remember when creating a web site for eCommerce could easily require a million dollar investment. Now you can create a web site for almost nothing - and be on your way with your latest invention or personal services. Smartphone apps can be built for less than $10K, so who needs an investor?
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Startup incubators and accelerators are popping up everywhere. Business incubators were all the rage before the dot-com bubble (700 for profit, many more non-profit). After the bubble burst and the recession, more than 80% of them disappeared. Now they are back in every community, with the best even waving money at graduates.
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The world is a now single market, both homogeneous and heterogeneous. Entrepreneurs now can think globally about the opportunity, from day one but start locally. This approach, popularly known as “glocalization,” means you design and deliver global solutions that have total relevance to every local market you plan to attack.
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Social media is a boon for entrepreneurs and startups. With the key social media platforms today, an entrepreneur can tune a product, build a brand, and grow the business with very low cost and a high interactivity never before possible. The elements include communications, mobile platforms, and location-based services.
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Large corporations have lost their ability to innovate. Conglomerates, which were the engines of growth and vitality in the twentieth century, have proven themselves unable to innovate, and have a tarnished public image due to financial woes and poor management. Most now routinely buy startups for new technology and new products.
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Women are a growing force as entrepreneurs. According to the latest Women’s Entrepreneurship Report, overall female rates have increased by 10% and the gender gap has narrowed by 5%. Women inherently should have an advantage, since women already control over 70% of household income and $20 trillion of consumer spending.
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Baby Boomers are joining the fun in record numbers. The percentage of startups created by entrepreneurs between the ages 55 and 64 continues to grow more than any other age demographic. Driving forces include their need to work and stay energized for the longer life expectancies, as well as the opportunity to give life to long-held dreams.
Looking ahead, Investopedia predicts that in 2018 the supply of VC money will continue to grow. The record-high fundraising activity of the past 18 months has been driving a growing amount of dry powder. They also suggest that a business valuation discipline has returned to the Valley. The investment thesis has shifted from “growth at all costs” to “growth with fundamentals.”