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kauffman index

What’s in the Numbers? | Understanding Kauffman Index Reports

Feeling fatigue from the amount of rankings that come out in a year? Month? Week? You’re not alone.

One of the easiest ways to collect clicks or visits to a website is to feature a new poll where your city or state might rank highly. Whether it’s Best Lifestyle, the Coolest College Town or the Happiest Resident, there’s always a new poll that your city may rank higher up the charts. This is no different when it comes to startup rankings.

In the bumpy world of startups and innovation ecosystems; however, there is an authoritative voice for the startup and entrepreneurial watchdogs — the Ewing Marion Kauffman Foundation.

Every year, Kauffman releases three separate reports that make up ‘The Kauffman Index Entrepreneurship Series‘ offering in-depth measures of the people and businesses that contribute to America’s overall economic dynamism. The series consists of reports and accompanying interactive data visualizations presenting entrepreneurial trends nationally, at the state level, and for the 40 largest metropolitan areas in these categories:

  • Startup Activity
  • Growth Entrepreneurship
  • Main Street Entrepreneurship

Also of note, the Kauffman Foundation uses a rolling average (from three to five years) to calculate its ratings for metro areas — these are not “blips” on the radar — aberrations are mitigated through aggregated data.

Cities rise and fall every year; the tide ebbs and flows. The Kauffman Foundation typically releases its three reports throughout the year — summer, winter and fall. The result can be a confusing current of advancing and dropping cities when, in fact, movement is much less volatile (and less frequent) in a singular report.

Let’s take a look at how the Kauffman rankings stack up up for Ohio’s cities.

Startup Activity

If you hear someone say, “Cincinnati is the number one city in Ohio for startup activity,” they’re not wrong.

Cincinnati, Columbus and Cleveland are the three Ohio regions represented nationally in Kauffman’s reporting. Officially, Kauffman says that this particular report “measures business startup activity (i.e., new venture creation) from 1997 to 2016 for the United States.”

The Startup Activity Index integrates several high-quality sources of entrepreneurship information into one composite indicator, which relies on three components:

  1. Rate of New Entrepreneurs
  2. Opportunity Share of New Entrepreneurs
  3. Startup Density

In 2017, Cincinnati ranked as the top city in Ohio for startup activity — number 18 nationwide. Ohio had a strong showing. Columbus and Cleveland ranked at 23 and 28, respectively. To check out the full rankings for Startup Activity, click here.

Growth Entrepreneurship

Much like someone saying, “Cincinnati is number one for startup activity,” hearing, “Columbus is number one for startup growth,” is 100 percent true.

Columbus ranks near the very top of the national rankings for growth entrepreneurship which is great for Ohio. As detailed by the Kauffman Index, growth entrepreneurship is their early indicator of business growth in the US.

The three factors that Kauffman uses to determine growth entrepreneurship are:

  1. Rate of Startup Growth
  2. Share of Scaleups
  3. High Growth Company Density

Throughout the rest of Ohio, Cleveland and Ohio also rank well — as the 18th and 22nd, respectively, cities for growth entrepreneurship. For the full growth entrepreneurship rankings, click here.

Main Street Entrepreneurship

Rounding out the Kauffman Foundation’s three-part entrepreneurship series is ‘Main Street Entrepreneurship.’

Here, Cleveland becomes the third city in Ohio to rank tops for a Kauffman report in Ohio. Main Street entrepreneurship — as defined by Kauffman — measures established small business activity, focusing on businesses more than five years old with less than 50 employees.

The three components that measure Main Street entrepreneurship are:

  1. Rate of Business Owners
  2. Survival Rate
  3. Established Small Business Density

Columbus and Cincinnati follow-up behind Cleveland at 16 and 25, respectively. For the full Main Street entrepreneurship report, click here.

Bringing it together

By Kauffman’s standards, no city in Ohio is singularly the “best.” However, each of the three major cities is leading at something.

If you want to be a part of a community that’s dense with startups and opportunity around them, Cincinnati may be best. If you want to establish a small business, Cleveland might be the answer. If you’re looking to scale your startup, Columbus could have what you’re looking for.

At the end of the day, Ohio offers a diverse set of cities that aren’t only thriving, but also providing different benefits. Being a part of the startup scene in Ohio means you have access to the nearby assets, community and tools you need to be a successful entrepreneur.

There’s a “campus-like” feel to the Midwest that’s different than either of the coasts. There’s density here. A tank of gas is enough to get you to a neighboring city and back if you want to jump to another ecosystem over lunch. Meet with an investor or a subject matter expert or do some demographic research that one town alone can’t provide. As Kauffman indicates, each ecosystem has its strengths — nearby hubs may have the solution your basecamp may not. And last, it’s home — Midwestern hospitality is no joke.

Our ecosystems work together likes gears. One city isn’t spinning the wrong way or working on its own — we all turn and grow in unison.

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