Memphis regularly extols achievements in its rearview mirror while ignoring the potential right in front of it.
Entrepreneurship joins music in that category, and Start Co. regularly reminds us that entrepreneurship-led economic development is an opportunity that must become a priority for the city.
Through its data-driven analysis and action, Start Co. challenges Memphis to answer seminal questions: “Is entrepreneurship actually driving economic growth or is it merely helping people survive in nonemployer companies, and what can be done about the weak job creation among young firms?”
To answer the questions, Start Co. has been a reliable source of inconvenient truths about entrepreneurship in our community, and the latest wake-up call comes in the form of its eight-page report by the highly respected Urban Institute, “How Does Entrepreneurship in Shelby County, TN Measure Against Comparable Counties?”
Getting Honest with Shelby County
Beneath Memphis bragging points about low cost of living, high purchasing power, world-class logistics infrastructure, and six Fortune 1000 companies, there is a troubling reality: stagnation, weak job creation among young firms, and an entrepreneurial ecosystem that appears thinner than it should be.
Just consider the wake-up call in the report’s summary on Urban Institute’s website:
“Shelby County hosts nationally recognized firms yet faces a trend of economic stagnation. Our analysis found that Shelby County is underperforming compared with its peers in supporting prospective entrepreneurs and young, small firms, for which job growth is limited and firm survival is declining. Entrepreneurship may represent economic necessity—a lack of well-paying or flexible work—more than market opportunity to a greater degree in Shelby County than elsewhere.
“A combination of strategies is likely needed to empower entrepreneurs with near-at-hand market potential and to invest in the talent development and employment of others. The small and midsize firms of today may be the regional growth engines of tomorrow. But without adequate resources, their ability to reach their potential may be stifled.”
The sense of urgency that should accompany this report – released last week in an event at Crosstown Concourse – is underscored even more by a recent Brookings Metro Monitor report, which concluded that among the 55 largest metro areas in the U.S., Memphis is #43 in growth, #49 in prosperity, #31 in inclusion, and #45 in racial inclusion.
We all know the definition of insanity, and the data from Urban Institute and Brookings convincingly indicate that our economy is in need of serious innovative disruption and that’s what a definitive, actionable, and persistent focus on entrepreneurship can be.
That’s the power of the latest wake-up call from Start Co. There’s never been a better time to listen.
A County of Nonemployers
One of the most striking data points in the Urban Institute report is Shelby County’s unusually high rate of nonemployer businesses – 49.3 per 100 working-age adults.
On the surface, that might sound like vitality: nearly half the working-age population appears to be running some form of business.
But the report cautions against romanticizing that number.
Most nonemployer businesses are sole proprietorships with no employees. Many are part-time ventures. Some generate modest supplemental income rather than a full livelihood. While a handful may eventually scale into employer firms, most never do.
A high concentration of nonemployers in Memphis can signal something else: a weak wage labor market. If residents cannot find stable, adequately paying jobs, they may turn to self-employment out of necessity rather than opportunity.
That distinction – necessity versus opportunity entrepreneurship – matters. Opportunity-driven entrepreneurs tend to build scalable companies. Necessity entrepreneurs are often trying to fill income gaps. Shelby County’s data suggest the latter may be playing a larger role.
Fewer Young Firms, Less Innovation
What’s especially troubling in Memphis is the harsh reality that greets young firms despite the fact they deserve special attention and support because they are the road to a city with a better economy.
That’s because all small businesses are not created equal. Research concludes that young firms – especially those under six years old – are disproportionately responsible for innovation and net job creation.
This is where Shelby County falls behind.
Only 8.2 % of employer jobs in Shelby County are in firms younger than six years old. In the other 99 largest counties, that figure averages 12.8%. That gap is substantial.
Similarly, microbusinesses – firms with 1 to 19 employees – account for just 11.4% of employer jobs locally, compared with 16.2% elsewhere.
In other words, Shelby County is overrepresented in large firms and underrepresented in the smallest firms that often serve as pipelines for growth and innovation.
That said, there is no single “ideal” firm-size distribution, but when a region has fewer young firms and fewer microbusinesses than its peers, it risks losing dynamism. Smaller firms are more likely to be locally owned. They often reflect local culture, build neighborhood wealth, and create entrepreneurial ecosystems that feed on themselves.
If Memphis feels less like a hotbed of startup energy than cities like Austin, Nashville, and Memphis’ peer cities, the numbers help explain why.
Young Firms Are Shrinking
But they’re not the only reasons for concern. There’s also net job creation.
From 2019 to 2023, Shelby County lagged other large counties in net job creation across nearly every firm age and size category. Among young firms (1 to 5 years old), net job creation averaged -2.7%, compared with -0.6% in peer counties.
Put simply, young firms here are shrinking or failing at significantly higher rates.
For firms aged 6 to 10 years, the local gap reflects lower job creation rather than just higher destruction. These firms aren’t necessarily collapsing; they just aren’t growing fast enough to keep pace.
This pattern undermines a core engine of economic growth: young firms typically generate new jobs that offset losses from older firms. When that engine sputters, regional job growth stalls.
To exacerbate things, the story doesn’t change regardless of firm size. Businesses with one to 19 employees in Shelby County underperform peers by more than two percentage points in net job creation. Midsize and large firms also lag, though the gap is most pronounced among the smallest enterprises.
Part Two: Wednesday, March 25, 2026
