By Aman Kumar
With the onset of the COVID-19 pandemic in March, nearly all facets of American life have been affected. The effects on small businesses are especially significant. According to a recent survey, 43% of small businesses were forced to shut down even before the availability of government aid. On average, each of these businesses let go 4 in 10 of their employees. Surprisingly, the shutting of businesses combined with an increase in the unemployment rate to an all-time high since the Depression era results in economic opportunity. Property values are low, and recently unemployed people are looking for new sources of income. With this, we are seeing a new entrepreneurial wave––Americans are launching businesses at the “fastest rate in more than a decade.” New business filings are increasing, and with it, employment options are opening up at startups.
The Startup Opportunity
But why are people so eager to start a business during a pandemic? The simple answer: opportunity. Stuck at home and enticed by the startup world’s relative ease of entry, longtime enthusiasts are capitalizing upon the chance to “follow their dream.” There are numerous benefits to this pioneering culture. The opportunity to gain a new source of income is a key motivator. Leigh Alshuler is a New Yorker who lost her immersive theater job in March. Soon after, she decided to put her long-term passion for bookstores to use by starting her own store.
Employment opportunities correspondingly increase. Though small, startups have historically been responsible for around 20% of job creation and half of private sector employment. This in turn spurs economic growth. In fact, there now exists a global-scale “COVID Accelerator”, which aims to help new businesses grow and attract investment. Innovation is at a peak, and venture capitalists and angel investors––such as Silicon Valley entrepreneurs––are excited to invest in “future winners.”
Sustainability in the Future
Still, is this the right time to start a business? It depends on if your industry is a “winner” or not, according to startup accelerator co-founder David Brown, who contrasted the struggling travel industry to telemedicine. Startups focused on issues arising from the pandemic are uniquely positioned for success. A deeper concern is whether this entrepreneurial shift will last. Under normal circumstances, 20% of startups don’t make it past their first year. And by the end of the last recession, entrepreneurship was “sluggish” for years. This may spell trouble for the COVID era. Given the pandemic, if there isn’t sufficient consumer demand to meet the businesses’ supply, startup owners may lose significant time and money. While the supplemental income is beneficial to owners in the short-term, the difficulty in growing the new venture can hurt long-term sustainability. Will the startups even be able to compete––especially with inexperienced owners? Rashmi Menon, an entrepreneur at the University of Michigan, suggests it’s possible. There are five key considerations: applicability to the pandemic, differentiation, qualification, experience, and funding.
Many do find success despite obstacles. Madison Schneider, a recent college graduate from Haviland, Kansas, used personal savings to open a bakery even though the site’s purchasing cost was “out of [her] price range.” It seems she made the right decision: the bakery has been “busy every day since,” with Madison now looking to take on new employees. Ultimately, it seems that the pandemic has presented both opportunities and challenges. Right now, we’re seeing a widespread push towards seizing these opportunities––an entrepreneurial drive like never before.