When it comes to TV shows and movies, Americans have shown a recent obsession with the rise of entrepreneurs. “Shark Tank” is an annual Emmy nominee, and the feature film “Steve Jobs” took home a couple Golden Globes earlier this year.
Perhaps it’s because many people lost their jobs during the recession, or maybe it’s because new technology and the “gig economy” has enabled more opportunity, but people seem to enjoy watching others rise to prominence as a result of their ideas and hard work.
A look at the numbers may explain why so many Americans can relate to self-starters. One report revealed that one in three workers in the U.S. is a freelancer.1 Another found that all of the net employment growth in the United States since 2005 could be attributed to alternative work.
Interestingly, the same study found that there are two types of mindsets among workers in “alternative” positions:2
- 84% of independent contractors prefer to work for themselves
- 77% of temp-agency workers would prefer a permanent job
It seems a majority of people tend to seek out work best aligned with their mindset and employment prospects. But perhaps there is a middle ground: Using a part-time independent job to supplement income from a more secure job.
For example, take a look at Uber workers. Two-thirds of the company’s drivers have other full-time jobs, and 48 percent have college degrees. It’s also been a popular income stream for those approaching or near retirement, as 25 percent of drivers are aged 50 and up.3 Certainly the rise in “gig” (short-term assignment) work opens up new opportunities for retirees who need to supplement their savings.
Despite the increase in workers taking on side jobs, the number of entrepreneurs in the U.S. is actually experiencing a long-term decline. It’s one thing to work extra hours for a little more income, or applaud the initiative Steve Jobs took at the movie theater. But it’s another to act on your own idea and take a leap of faith with your own business ideas.
Starting up a new business can be a risky endeavor. On average, one in five fail within two years, and 50 percent don’t make it to five years.4 This can at least be partially explained by the way new startups are financed.
A quick look at headlines might lead you to believe that the majority of startups are funded by venture capitalists (firms that invest other people’s money). While these may make for great news stories, that’s not actually the case. Less than 5 percent of startup funding comes from venture capitalists,5 whereas about two-thirds get their capital from loans, personal savings, friends and family.6
While it is fun to watch people strike it rich with their inventions on “Shark Tank,” it’s a rare occurrence that the average person has a million-dollar idea. It may not be as exciting, but proper saving and planning continues to be an effective way to ensure you have enough money in retirement.
Content prepared by Kara Stefan Communications.
1 Freelancers Union and Elance-oDesk. September 2014. “Freelancing in America.” http://fu-web-storage-prod.s3.amazonaws.com/content/filer_public/c2/06/c2065a8a-7f00-46db-915a-2122965df7d9/fu_freelancinginamericareport_v3-rgb.pdf. Accessed June 17, 2016.
2 Rick Wartzman. Fortune. April 27, 2016. “Working in the Gig Economy Is Both Desirable and Detestable.” http://fortune.com/2016/04/27/uber-gig-economy/. Accessed June 17, 2016.
3 Aparna Mathur. American Enterprise Institute. Feb. 2016. “New Economy, Old Challenges Facing Entrepreneurs.” https://www.aei.org/wp-content/uploads/2016/02/NEG-7_Policy_-MATHUR.pdf. Accessed June 17, 2016.
4 Dane Stangler. Ewing Marion Kauffman Foundation. 2016. “The Looming Entrepreneurial Boom: How Policymakers Can Renew Startup Growth.” http://www.kauffman.org/neg/neg-intro#theloomingentrepreneurialboomhowpolicymakerscanrenewstartupgrowth. Accessed June 17, 2016.
5 Arnobio Morelix. Ewing Marion Kauffman Foundation. May 13, 2016. “Three Facts You Probably Didn’t Know About and Venture Capital and Entrepreneurship.” http://www.kauffman.org/blogs/growthology/2016/5/three-facts-you-probably-didnt-know-about-and-venture-capital-and-entrepreneurship. Accessed June 17, 2016.
6 J.D. Harrison. The Washington Post. March 16, 2016. “No, entrepreneurs, most of you don’t need angel investors or venture capitalists.” https://www.washingtonpost.com/news/on-small-business/wp/2015/03/16/no-entrepreneurs-most-of-you-dont-need-angel-investors-or-venture-capitalists/. Accessed June 17, 2016.
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