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Entrepreneurship in Montana

The percentage of Montanans whose main occupation is owning a business is the highest in the country.

Montanans have a robust entrepreneurial spirit and aren’t afraid to start their own companies, but there is much work to be done to ensure their businesses survive in the long-run, according to a new study.

The percentage of Montanans whose main occupation is owning a business is the highest in the country. As of 2015, 10.2 percent of Montanans are their own boss, compared to 6 percent nationally.

About 3,400 people in the state start a business each month, a rate that ranked first in the United States from 2013-2015, and fourth in 2016.

Those statistics are according to the Bureau of Business and Economic Research at the University of Montana, which presented the State of Entrepreneurship report in conjunction with the Montana Chamber Foundation to a crowd in Missoula on Thursday.

However, in 2016, about 51.8 percent of all new businesses formed five years previously were still operating. That ranks ninth in the nation, but it still means than nearly half of all new businesses fail within five years here.

According to economist Bryce Ward, one indication of weakness in Montana’s entrepreneurial ecosystem is that new firms here tend to average about 3.9 employees after one year, which is the smallest new firm size average in the nation. Even after five years, the average business employed 6.6 people, which is the smallest average in the United States.

Also, the number of private Montana firms with at least $2 million in revenue that have grown by at least 20 percent annually for three straight years is relatively low, ranking 43rd in the country. And Montana has a disproportionate share, 23 percent, of seasonal or part-time businesses, but these firms only employ less than 8 percent of the total state workforce.

"I would love to see more Montana entrepreneurs succeed at creating high-growth companies that create good job opportunities for lots of Montanans, that pay high wages and that serve customers across the country, and the world," Ward said. "Achieving this vision is difficult. There is not one thing that will get Montana there."

He said creating a deeper talent pool is critical.

"Making sure new, growing firms have access to adequate capital is important," he said. "Making sure that we continue to train and support entrepreneurs is important. Just like a natural ecosystem, the entrepreneurial ecosystem has many parts, and each part must work together for the system to succeed."

Christina Henderson, the executive director of the Montana High Tech Business Alliance, pointed out that Montana was dead last, even behind Puerto Rico, in the United States in 2015 for the amount of venture capital going to firms. However, in 2017 the state saw $83 million in investment, and that number doesn’t even include a $20.3 million venture capital investment to Missoula-based onXmaps and a $25 million deal for a company in Livingston.

“It seems to me this is really trending upward,” Henderson said.

Ward agreed, saying the venture capital investment in Montana has increased in recent years, but on a per capita basis Montana ranks 33rd in the average number of such deals per year between 2012 and 2016, and ranks 43rd in the amount invested.

Several small business owners, including Linda Miller, the owner of Paradise Dental Technologies, talked about how they got their start in Missoula.

"I was surprised at how many people don't understand what it's like being an entrepreneur," Miller said. "It's lonely being an entrepreneur many times. People think having your own business is cool and that you just got there. But it doesn’t just happen. Unless someone is an entrepreneur, they sometimes just don’t get a lot of the challenges we go through."

Webb Scott Brown, the executive director of the Montana Chamber Foundation, said Montanans need to get to work to address the issues identified in the report.

"We are excited to receive this report and start analyzing specifics,” said Brown. “While we are gratified to know that Montana ranks well on business starts, we can also see we’ve got work to do in the future. The focus on entrepreneurship in this year’s Economic Update series is already bearing fruit.”

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