Miami May Be Number Two for Startups, but Most Stay (Very) Small Businesses

Miami May Be Number Two for Startups, but Most Stay (Very) Small Businesses
Photo via Pexels CC2.0

Tons of Miamians start their own businesses. Many perhaps dream of running worldwide empires out of corner offices in Brickell office buildings. But it turns out that few of those would-be empires ever grow to employ more than five people. 

Back in August, the Kauffman Index crowned Miami America's second hottest metro for startup activity based on the sheer number of small business started here every year, but today the Index dropped a second component: it's Growth Entrepreneurship report. Out of the 40 metro areas analyzed, Miami came in second to last in small-business growth. 

Though "startup" is a buzzword most associated with the tech industry, Kauffman counts any company less than five years old that employs its owner and at least one other person as an employee. That means everything from a group of techies trying to come up with the next world-disrupting app to your aunt starting a cupcake baking business are counted as startups. 

Miami has a lot of those startups. In its August report, Kauffman found that there were 247.6 startups in town for every 100,000 residents, the highest density of any metro in America. They just don't have a tendency to grow very much. 

The analysis found that the rate of startup growth in the area was just 39.46 percent. That means the average startup started out with 4.8 employees, but after five years of operation only grows to 6.7 employees. 

Kauffman keeps data all the way back to 1983, and the startup growth rate at that time in Miami was 84.38 percent. The rate peaked in 1988 at 97.46 percent but has been tumbling down ever since. That's not true in all cities. Washington, D.C., the Index's crowning champ of startup growth, has a growth rate of 116.85 percent. 

The rate of startup growth in Miami is well below average.
The rate of startup growth in Miami is well below average.
via Kauffman Index

The chances of a startup growing into a super-successful company are even smaller. Just 0.81 percent of Miami startups grow to employ more than 50 people in their first ten years of operation. In 1987, that share was 2.27 percent.

The percentage of startups that grow into mid-sized companies has been declining in Miami for decades.
The percentage of startups that grow into mid-sized companies has been declining in Miami for decades.
via Kauffman Index

For context, we might want to look at the August report's "opportunity index." It measures the percentage of entrepreneurs who left steady jobs of one sort or another to start their own businesses. The rate was 73.9 percent, which was the second lowest of any metro in that report's top ten.

That means 26.1 percent of small businesses in the area are started by those who are coming directly out of unemployment. 


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