Index: Nevada at No. 47 in business creation

Despite its reputation as a business-friendly state, Nevada has fallen to No. 47 on the latest State Entrepreneurship Index comparing business creation.

The index was developed at the University of Nebraska, Lincoln's Bureau of Business Research and Department of Economics. It tracks five measures that indicate entrepreneurship in a state.

Those measures are a state's business formation rate, the number of patents per 1,000 residents, gross receipts of sole proprietorships, partnerships per capita and the business formation rate.

Nevada's drop was the biggest decline since 2008, the last time the study was conducted. The Silver State previously was ranked No. 7. Now, only Mississippi, Arizona and South Carolina rank lower.

"Both results relied on two of our five measurements: business formation rates and gross receipts of sole proprietors," said Eric Thompson, associate professor of economics and director of the Bureau of Business Research.

Thompson attributed the No. 7 ranking in 2008 to the population boom and the new businesses that were created to serve those residents. Many of those businesses catered to the residential and commercial real estate markets.

He said the collapse of the real estate market was the main reason for Nevada's decline. "The businesses created were not durable in this recession, maybe in another recession," he said. "Nevada benefited from the real estate boom, but it also continues to suffer from its collapse."

Meanwhile, several of Nevada's competitors received higher rankings. Utah was No. 43, New Mexico was No. 29 and California was ranked No. 13.

Taking the top three spots were New York, Washington and Mass­achusetts. The new rankings were compiled using mostly 2010 data.

Thompson said larger states such as New York and California often do better than Nevada in a downturn because of a more established business community more able to adjust to downturns.

The University of Nebraska, Lincoln index paints a much darker picture of Nevada than an entrepreneurial index released in March by the Kauffman Foundation in Kansas City, Mo.

According to the "Kaufman Index of Entrepreneurial Activity," Nevada and Georgia had the highest entrepreneurial activity rates, with 510 per 100,000 adults creating businesses each month. They were followed by California with 470 per 100,000, Louisiana at 460 and Colorado at 450.

Thompson said if their report focused only on starts per capita, Nevada would have ranked ninth. He said to get an accurate picture of economic activity information on startups that failed, tax receipts and patents must also be included.

"I'm very hopeful going forward for Nevada," he said. "I expect Nevada to be a very dynamic place again."

Another gauge of economic activity in Nevada is venture capital investments. However, funding of startups has been sluggish this year, with only one investment completed in the first six months of 2011, according to data from Dow Jones VentureSource.

The year's only investment was $7 million by Intel Capital in May to iStreamPlanet, a Las Vegas-based Internet broadcast services company.

Venture investment into companies based in Nevada has always been light. In all of 2010, three deals collected a total of $30 million, according to data compiled by Dow Jones Venture Source.

Contact reporter Chris Sieroty at
csieroty@reviewjournal.com or 702-477-3893.