A recent study indicates that the rate of businesses being created in Rhode Island is lagging behind most of the country, but those involved in the local startup scene say no one should be drawing conclusions that the state is an “entrepreneurial desert” as the study suggests.
The study by Eton Venture Services said Rhode Island had the fourth-fewest number of new business filings per capita, based on U.S. Census Bureau data in 2022, the most recent year available. The study showed Rhode Island had 994 filings per 100,000 residents that year. By comparison, West Virginia ranked lowest with 776 filings per 100,000 residents and Wyoming the highest at 7,149 filings per 100,000 residents.
R.I. Commerce Corp. declined to comment on the study’s findings because of what it said were discrepancies in Eton’s calculations. The state agency said its data showed there were 997 new business applications per 100,000 residents in 2022, which would have ranked Rhode Island fifth lowest, just ahead of Massachusetts at 1,019.
Officials said conclusions shouldn’t be based on this one data point.
“Rhode Island is not falling behind at all,” said R.I. Commerce spokesperson Matthew Touchette.
The state has also made progress in becoming a more entrepreneur-friendly state in recent years, through moves such as cutting tangible property tax and the litter tax, Touchette noted.
“We’re always looking to make Rhode Island a better place to open a business,” he said.
According to the secretary of state’s data, the number of business starts has grown since 2022, when 13,426 “new entity” registrations were recorded. In 2023, that number increased to 13,902, said Faith Chybowski, secretary of state’s office spokesperson.
She said the office offers several tools for entrepreneurs and business owners, including workshops, office hours and a “business assistant” webpage that helps people understand requirements before starting the process of launching a business.
Annette Tonti, managing director of RIHub, a nonprofit assisting startups, said Rhode Island’s growth in entrepreneurship has been stagnant. But she’s also seen more organizations popping up in recent years to help get businesses off the ground, including RIHub, New England Medical Innovation Center, Hope & Main and 401 Tech Bridge.
Tonti said R.I. Commerce has provided additional support by sponsoring events and collaborating with RIHub to help entrepreneurs get the resources they need.
Indeed, Rhode Island’s tight-knit network makes it easier for entrepreneurs to connect than in other states, said Amy Erickson, program director for Innovation Studio Inc., a Boston-based startup-assisting nonprofit that has a Rhode Island office.
Erickson, who works in both Boston and Providence, said that while there are more business opportunities in Greater Boston, the competition is stiffer. And the Rhode Island business community is better at staying in touch with each other.
She said the low rate of new applications in Rhode Island doesn’t reflect the state’s entrepreneurial spirit.
“A lot of people want to start something,” said Erickson, noting she has seen high turnout to Innovation Studio’s early-stage business courses.
Ted Howell, president and attorney at Howell Legal Inc., a law firm that specializes in early-stage startups, said the number of business applications is not a reliable measurement of success in fostering new businesses. Startups may incorporate in a different state because the owners or investors prefer those laws.
Howell said it’s best to look across several different sources such as polls, surveys and studies to measure the level of each state’s entrepreneurship.
