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If you’ve already written your resolutions for 2015, here’s one item that’s probably not on your list: Take New Risks. I’m not talking about new risks like sky diving, or sampling cannabis. I’m referring to risks that test your ability to fulfill your deepest ambitions, including starting a new business or becoming an entrepreneur. For many people, the key stumbling block to trying something new involves a fear of ambiguity and the unknown.
Do you hear your voice – or the voice of others – saying any of the following in response to launching something new?
- “We don’t know what future market conditions will be.”
- “We can’t anticipate how customers will respond.”
- “We’re uncertain about the types of financing we can secure.”
- “We’re unsure what technological conditions will exist a year from now.”
If any of these phrases sound familiar, then you’ve felt the cold grip of ambiguity. The dark side of ambiguity is not a firm ‘no,’ but it is the source of hesitation that causes anxiety to set in even before the first step is taken. Once you feel your enthusiasm dampening for your new endeavor, you must often overcome it through optimism and sheer will.
But the brighter side of ambiguity has propelled America’s entrepreneurial magnetism for more than 200 years. 'Creating something new' when the outcome is uncertain has characterized our nation as a place where young people want to experiment with novel ideas, and where adults of any age can start something daring that did not exist before. As defined by Dr. Jacquelyn Byrd, CEO of Creatrix - a proven assessment tool that gauges innovation capability within individuals and teams - ambiguity involves a willingness to operate in a context of uncertainty or vagueness. Individuals who can tolerate ambiguity can achieve success without significant infrastructure or pre-existing resources.
US Startups Founded By Young Entrepreneurs At An All-Time Low
Americans carry in their minds the notion that young entrepreneurs provide grist for the mill that turns startups into big successes. Whether it’s the inspiration of twenty-something entrepreneurs like Steve Jobs tinkering with motherboards in his garage as he launched Apple, Mark Zuckerberg conceiving of Facebook in his Harvard dorm room, or Larry Page and Sergey Brin creating Google based on insights from their Stanford studies, we picture young entrepreneurs as the catalyst to building new businesses.
But in fact, the number of young entrepreneurs starting new companies in America has dipped to an all-time low. According to recent data from the Federal Reserve, America is losing young entrepreneurs and young business owners at an accelerated rate. Federal Reserve figures show that the percentage of households headed by private business owners under 30 years old dropped to 3.6% in 2013 from 10.5% in 1989. Although private business ownership among adults in their 20s had been falling as the new millennium approached, the Great Recession sent shockwaves through the ambitions of young entrepreneurs seeking to establish startups .
Similarly, the Kauffman Foundation, a noted non-profit group based in Kansas City, Missouri confirms that the proportion of young adults who start businesses each month dropped to a 17-year low in 2013. Looking at the last decade alone, Kauffman Foundation figures reveal that young people aged 20 to 34 accounted for only 22.7% of new entrepreneurs in 2013 down from 26.4% in 2003.
Seeking to understand the declines in startups he was seeing in the New York City tech sector, in 2014 Michael Goodwin of Endeavor Insight began studying entrepreneurship trends in the Big Apple. Leveraging his deep involvement in the city’s technology base as well as it strong open data movement, Goodwin’s study showed that the average age of a founder starting a new business in New York City is 31. Fully 25% of all startups in the Big Apple are founded by individuals aged 35 or older. So while these figures are heartening for the thirty-something crowd, like data from the Federal Reserve and the Kauffman Foundation, they reveal that younger entrepreneurs are not as active in the startup community as other age groups.
As well, Goodwin indicates the bulk of New York City startups are not championed by tech geeks. In 2014, 35% of startups came from individuals with STEM-related skills (engineering, math, computer science) but 65% came from non-STEM related disciplines (philosophy, history, economics). So while these findings don't support the legend of young technology mavens dominating the startup scene, they do suggest a positive diversity within New York's entrepreneurial community.
Having a steady stream of young business owners is key to America’s economic vibrancy. John Davis, faculty chair of the Families in Business Program at Harvard notes, “We need startups not only for employment, but also for ideas. It’s part of the vitality of this country to have people starting new businesses and trying new things.”
US Entrepreneurial Activity Closely Tracked
Unlike the uber-success trajectory established by twenty-something wunderkinds Steve Jobs, Bill Gates, and Mark Zuckerberg, most young entrepreneurs start a business after they've graduated from college and have been through at least one job cycle . This gives them a chance to see themselves in a business setting, and gain confidence in their own abilities even if they don’t yet have significant experience. Following the Great Recession, college graduates had an extremely difficult time finding jobs right out of school. Pairing this with major student debt loads, it's not hard to see why startups founded by twenty-something entrepreneurs took a dramatic hit.
So although the picture for young entrepreneurs has faded significantly over the past 10 years, overall trends toward entrepreneurship in the US are up. Babson College, which sponsors the Global Entrepreneurship Monitor (GEM) established in 1999, notes in its 2012 study that a main indicator of new business start-ups is at an all-time high. Called TEA (Total Early-Stage Entrepreneurial Activity), this measure assesses the total percentage of working age adults who are either about to start an entrepreneurial venture, or who have been engaged in one for a maximum of 3.5 years. The GEM results indicate that 13% of the total US adult population is currently engaged in some type of early stage entrepreneurial activity.
To reverse the decline in startups among young adults, the Kauffman Foundation and other bodies have worked tirelessly over the past 20 years to establish entrepreneurship courses in more than 2,000 colleges and universities in the US. Today, two-thirds of all institutions of higher learning in America offer more than 5,000 courses on entrepreneurship, up from 250 back in 1985.
But despite all this well-intentioned effort, the massive resources for encouraging young entrepreneurs in America are not succeeding .
How To Encourage Young Entrepreneurs
It’s crucial for America to support young entrepreneurs because they are part of the larger innovation ecosystem in our nation. The qualities that nurture entrepreneurship are linked to the qualities that nurture innovation.
Ambiguity and a fear of risk represent creeping dampers that discourage young entrepreneurs from starting a new endeavor, regardless of their finances or educational attainment. Without attention to the resilience it can nourish, the dark side of ambiguity is the killer of hopes and dreams. Unless we connect the bright side of ambiguity to courage and persistence, the dark side of ambiguity causes young entrepreneurs to lose their nerve. Unless we recognize how ambiguity forces us to see our strengths, ambiguity can suck away our confidence in starting new endeavors as young adults.
In the New Year, don’t let ambiguity prevent you from Taking New Risks. Don’t let it rob you of a vibrant future in an untested area of your life, especially if you’re just starting your career – or know someone who is.
Here are four positive ways you can Take New Risks in 2015 and strengthen your entrepreneurial leanings, or the startup aspirations of a young person you know:
- Deliver a “Be not afraid!” pep talk to your young employees, sharing where you’ve wrestled with ambiguity in your own career and how your overcame fears of risk.
- Signal your willingness to ‘fund’ new businesses started by employees who spend a minimum of three years with your firm, including this in your job recruitment descriptions and job boards.
- Mentor a young person in high school or college, nurturing their business ambitions and making them aware of crowdfunding resources like Kickstarter.com.
- Create fun challenges for your teenage children, allowing them to safely explore the notions of risk and ambiguity, and feeling what it’s like ‘not to know the answer’ as they begin.
One of America’s greatest entrepreneurs, Thomas Edison, was 29 when he invested proceeds from his early inventions to build his Menlo Park, New Jersey laboratory. Home-schooled for several years by his mother, Edison bootstrapped his way to become a small business owner and entrepreneur, and a world-famous innovator by the age of 31. Although Edison lacked a college degree, he did not lack a willingness to tolerate ambiguity. He was willing to experiment, and to risk. Deepen your resolve to Take New Risks in 2015, and pave the path for an aspiring young entrepreneur in the New Year.
