Entrepreneurship in Orlando

Does Orlando have an entrepreneurship problem?

Every year the Kauffman Foundation, a private foundation that supports entrepreneurship through programs and research, puts out an annual report on startup growth. You may already be familiar with the Kauffman Foundation- 1 Million Cups is a Kauffman program.

The annual startup report, one of many reports the Foundation publishes, examines the number of startups (“firms less than one year old employing at least one person besides the owner”) that began the previous year at a national, state, and metro level. Since many regions don’t have the capacity or the incentive to track entrepreneurial growth on their own, this is very useful research.

It’s one of the few ways we have to empirically track the growth of startups here in Orlando, and what this year’s numbers reveal is important to consider. Entrepreneurship in Orlando is on the decline, and last year the drop was particularly steep.

In fact, Orlando ranks 33rd out of the 40th largest metro areas in the country. Since the report is meant to gauge entrepreneurial growth in thriving business communities, that number should be of some concern. Even more troubling, the rank constitutes a steep drop of 12 ranking points from 2013. It was the most significant drop in rank among all the metro areas included in the study.

This is nothing new. Startup growth in Orlando has been on the decline since 2011.

The good news is that this isn’t a reflection of overall economic growth. Most experts say the trend is the result of a recovering job market and regional economic development efforts to recruit large companies from outside of town. Deloitte announced last year that it would hire for 1,000 jobs in Lake Mary, and two years ago Verizon set out to hire 750 people. Then there are other opportunities for top talent at EA, Universal, Disney, Symantec, and others.

So why should it matter that we don’t have a growing number of new companies, if the big ones are doing so well?

Well, according to U.S. Census Bureau information, all net new job growth in the United States comes from companies that are less than 5 years old. Established companies both create and eliminate jobs, often in cycles. On average, net job growth occurs only through the growth of new businesses (source).

That means, as pointed out by Tim Kane, Kauffman Foundation senior fellow in research and policy, that “because startups that develop organically are almost solely the drivers of job growth, job-creation policies aimed at luring larger, established employers will inevitably fail. Such city and state policies are doomed not only because they are zero-sum, but because they are based in unrealistic employment growth models.”

Startups are important for long-term economic growth.

We can look to one of our neighbors as a model. Miami- only three and a half hours away by car- ranked number 2 of 40 in the Kauffman study, second only to Austin. To put that into perspective, Orlando’s neighbor has a higher ratio of entrepreneurs to non-entrepreneurs than San Jose or Los Angeles- areas known as centers for startup and tech growth.

Of course, Miami has the Knight Foundation to thank for much of its recent success. The foundation has helped to fund events and resources like The Lab, Refresh Miami, Startup City: Miami, eMerge Americas, and Endeavor Miami, among others. Orlando has just begun to put similar startup infrastructure in place, and it isn’t nearly as well-funded.

How do we proceed, given what we know? How should this information impact our business culture and our discussions? What long-term effects will companies like Verizon and Deloitte have on the future of Central Florida’s economy? What resources have other cities put in place to encourage entrepreneurship? What does Orlando need to do to compete on a national and global scale?

The city will have to continue to develop resources and explore new options in the coming years, but recent growth is a good sign that the infrastructure being put into place is strong.