GUEST EDITORIAL: Startups are booming thanks to COVID
If you’re looking for silver linings in this pandemic-damaged economy, here’s a good one: the American entrepreneurial spirit is alive and well. In fact, COVID-19 seems to have uncovered it.
According to census data, there were 500,219 new business applications in May 2021 — an increase of more than 68% year-over-year. Obviously, the pandemic caused a deep dip early in 2020, but startups have more than recouped those losses, reaching levels not seen in decades.
According to a February report by the Ewing Marion Kauffman Foundation, about 380 out of every 100,000 American adults became new entrepreneurs each month last year. That rate rose over the previous year for every demographic category: genders, ethnicities, immigrant statuses and age groups.
The rise was geographically universal too. According to a report by Visual Capitalist, from January 2020 to January 2021, new business applications rose 78% in Texas, which put it about the middle of the pack nationwide, far behind Louisiana (112%) and Mississippi (164.4%) but ahead of New Mexico (39.9%) and Colorado (47.3%). No state in the union saw a drop in new businesses over that time.
The most popular sectors for startups were retail, professional services and construction, Visual Capitalist reported.
What makes this silver lining even brighter is that it comes after a long decline of American entrepreneurship.
“U.S. entrepreneurship has largely been on the decline for more than three decades,” Dallas developer and author Craig Hall lamented in his 2019 book "BOOM: Bridging the Opportunity Gap to Reignite Startups." While the raw number of startups was higher when Hall wrote that than it had been in years, the number of startups as a percentage of all businesses in the country has been in a decades-long decline, according to Kauffman data.
Many sources, including Hall, have asserted that one of the factors driving the decline in entrepreneurship for decades has been consolidation. With large companies reaching deeper into almost every market, there’s just less room for small businesses. If the pandemic disrupted that trend, that’s a good thing.
But there may be another story beneath the numbers. In 2015, Inc. magazine reported on another methodology for tracking entrepreneurship by an academic consortium called Global Entrepreneurship Monitor. That group looked at not only government data, but surveys of individuals and commerce experts. Its method included a category of entrepreneur labeled nascents: those in the embryonic stages of business creation. According to Inc., these are people with a side hustle, who would likely report being employed by someone else, but are actively pursuing commercial projects of their own. The GEM report said the rate of nascent entrepreneurship had almost doubled in just five years between 2010 and 2015.
So what may have happened in 2020 was not a rise in enterprising behavior, but a removal of the employment cover under which it was operating. More Americans had to make their side hustle their full-time gig.
Whatever the details, it appears that at least some of those people who lost their jobs last year have launched out on their own. We wish them success. The entrepreneurial spirit has always been a key element in America’s prosperity. The dream of success and the willingness to take risks to reach it are core to what makes America American. In that regard, the pandemic disruption of 2020 might turn out to be a good thing for the future of the American dream.
— From The Dallas Morning News (TNS).