Are Millennials Less Entrepreneurial?

As a serial entrepreneur, who taught Entrepreneurism at the University of Shanghai for Science and Technology this past summer (USST), I read an alarming headline in the Wall Street Journal the day after New Years: Endangered Species: Young U.S. Entrepreneurs. I always thought that the US was a leader in entrepreneurism!

Citing data released by the Federal Reserve from 2013, roughly 3.6% of households headed by adults younger than 30 owned stakes in private companies, compared to 6.1% in 2010 and 10.6% in 1989. The Ewing Marion Kauffman Foundation reported that the proportion of young adults who start a business each month, dropped to its lowest level in at least 17 years.

These findings run counter to the widely held stereotype of Millennials as entrepreneurial risk-takers. Indeed, the article’s authors interviewed a number of New Yorkers in their 20s who reported putting off their entrepreneurial dreams for a while, even after having started and run businesses through their teenage years and college, to work for “Corporate” America.

The decline in young entrepreneurs is part of a broader drop in private business ownership over the past 25 years. New business formation slowed even in such high-growth sectors as technology, between 2002 and 2012, new according to economists from the University of Maryland and the Census Bureau. Indeed, according to Litan and Hathaway of the Brookings Institute, the US “startup rate” – new firms as a proportion of all firms – fell by nearly half between 1978 and 2011.

Why? Litan and Hathaway cite the slowing growth rate of the US population as a factor producing this rate decline. Another possibility is the rise of financial hurdles for this group. A 2014 Pew Research survey, found that the average net worth of households under 30 has fallen 48% since 2007, and that more than half of the 18-29 year olds reported one or more financial problems in the past year. Further, since the recession, banks have pulled back on small-business lending and continue to keep lending standards tight, which would adversely affect the Millennials competed to older adults running established firms.

Another possibility is that Millennials have a relatively low appetite for risk. A Babson University professor suggests it’s the fear of failure, noting that 41% of 25-34 year old Americans who saw an opportunity to start a business said fear of failure would keep them from doing so, up from 23.9% in 2001.

If Millennials are less entrepreneurial, because they’re risk averse, Mentor Our Kids believes that leaders of entrepreneurial ventures, such as those belonging to Vistage and other SME leader development organizations, can reverse this trend. By offering “mentoring internships” to young adults while still in school, they can show them the upside potential of starting businesses and inspire the kind of calculated risk taking that led to the creation of these businesses.

What do you think we can do to inspire greater confidence in our next generation of potential entrepreneurs to take the risks – and succeed? Share your thoughts! Then, let’s act!

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