Millennials (born 1977 to 1995) are not starting businesses at the same rate as previous generations. Data from the US Small Business Administration found that fewer than 4% of 30-year-olds were self-employed full-time. At the same age, 5.4% of Generation X-ers and 6.7% of Baby Boomers were fully self-employed. Overall, the number of self-employed Americans under the age of 30 has dropped by 65% since 1980. America is still the best place to start a business according to the Global Entrepreneurship Index.
So Why the Decline in Entrepreneurship?
The Baby Boomers might say that it is because millennials do not have the same work ethic as their generation or that they are not willing to make the sacrifices required to tough it out as an entrepreneur. Some believe it may not be the individual but a series of socio-economic changes that have made it difficult to start a business today. Despite the macro or micro problems, the decline of millennial entrepreneurship is too important of a topic to debate and the conversation needs to move past rhetoric and perceptions and look at some of the root causes.
Economic Conditions and the Funding Landscape has Changed
There is still the passion and desire to start a business that has not changed from generation to generation. However, the challenges are different and millennials do not work as previous generations. For instance, college tuition has increased 125% while wages have only increased 16% which has created an unnecessary barrier to most middle-class jobs in Americana, and educated people are now strapped with tons of student debt. Entrepreneurship isn’t the only thing in decline. Millennials are not having babies at the same rate as previous generations either. Millennials have been forced to push off getting married, buying homes, and having children so it is no wonder why they also push off starting their own businesses as well.
The Systems Have Not Evolved for the Next Generation of Entrepreneurs
You don’t typically think of the federal government as being innovative or very efficient with running a small business. However, one of the best programs available today is run by the Small Business Development Center. Here you can take free classes and get the help you need from people who are paid by the government to help you get your small business off the ground. However, most of the focus is on writing a business plan and helping you get funding. One of the revolutionary ideas in recent years has come from Steve Blank who has addressed the problem with writing business plans. Business plans are for established companies where startups and small businesses are still trying to find a sustainable business model to generate income. High tech startups in silicon valley and around the world have also embraced the Lean Startup methodology and design thinking.
These programs target only one type of entrepreneur; the local small business owner. Also, the SBDC does not meet the needs of millennial entrepreneurs. They are accustomed to online and on-demand tools and platforms. Millennials are used to pulling out their phone and pushing a button to get an Uber or using their phone for mobile banking. They order groceries, find restaurants, invest for retirement, and even find their spouses through dating apps. SBDC powerpoints, printed handouts, and individual consultations are not addressing the needs of millennials. It only makes sense that millennials need an easy-to-use platform that they can use to start a business.
The second type of entrepreneur usually comes from the startup ecosystems that stem from universities and incubators in major US cities. Venture capitalists seek out these companies as they are looking for the next unicorn. These high-tech startups play a key role in the economy and a capitalist economy. Andrew Yang even believes that starting a new venture is a core value to our country with the creation of Venture for America. However, the VC and startup world has its pitfalls as there is not a level playing field for all people. In July 2018, the Kauffman Foundation found that at least 81 percent of American entrepreneurs do not access venture capital — or, for that matter, a bank loan. This means that most startups are funded through personal wealth, high-profile networks, or family wealth. So it isn’t surprising why so many startup founders are older, white, males.
There is Still Hope
Despite the socio-economic circumstances, 62% of millennials have a dream business in mind that they would love to start which gives hope that the dream is not dead yet. There may also be some silver lining as a result of the Covid-19 pandemic. Many people have reconsidered the role their work plays in their life and have reevaluated their priorities. During “The Great Resignation,” employees have reprioritized how they make a living and have looked to new industries and new career options. More Americans are participating in the new gig economy which is expected to grow 33%. Part of the growth of the gig economy is due to the ease at which people are able to use an app on their mobile phone to start a side hustle or find a way to make money that fits their lifestyle.
Now is the Time
Now is the time to reconstruct the way we start businesses. Steel Town Labs is taking a different approach to solving this problem. We are seeking to democratize and distribute the proven processes by creating simple tools that anyone can use. Starting a business should not be a secret process that is reserved for MBA graduates and venture capitalists. You also do not need a bank loan or investment from a rich uncle on day one. You can get started today by validating your idea and going out and talking to customers.