Throughout Global Entrepreneurship Week (#GEW2021), thought leaders around the world are contributing their insights on the state of entrepreneurship. This article, contributed by Karen Kerrigan, President and CEO of the Small Business and Entrepreneurship Council, is part of this series.
As we mark Global Entrepreneurship Week 2021, we can cheer the fact that entrepreneurship took an upward turn during a dark period for our world. Indeed, while the COVID pandemic spread pain and devastation, millions of people saw – and continue to see – problems to solve and opportunities to pursue, as conveyed through their business creation activity. This is a notable silver lining of the pandemic, and our elected officials and government leaders need to fully recognize and support this phenomenon through an enabling policy environment.
While many countries across the globe are witnessing an entrepreneurial surge, let’s look at U.S. data to illustrate the growth. As reported by the U.S. Census Bureau, applications to start new businesses (4.3 million total) in 2020 represented a 24% increase over 2019. This positive activity has been sustained during 2021. As the Small Business and Entrepreneurship (SBE) Council recently reported, we have seen 16 straight months of applications running far ahead of where they were before the pandemic struck.
Also of note, “high propensity applications” (those most likely to hire employees) are on pace to be the highest ever on record. Census Bureau data “shows that nearly 1.4 million applications have been filed to form new businesses likely to hire employees through September of 2021,” according to the Economic Innovation Group. There were “409,000 more filings in 2021 than at the same point in 2019, or 255,000 more than at this point in 2020.”
Sound public policy can and must support these new entrepreneurs and those with startup ambitions. After all, while filing a business application is a key step towards launching a business, many steps remain to execute this intention. Starting a new business is indeed a risky endeavor even under “normal” circumstances. Launching one against the backdrop of economic and COVID uncertainty only makes the effort more challenging.
The government needs to create stability for entrepreneurs.
Elected officials and policy makers can start by evaluating where we are regarding the traditional “pain points” of entrepreneurs. For example, access to capital, markets, relevant training and education, and as well as government rules and taxes that harm competitiveness and growth, are a few that come to mind.
Thankfully, technology and technology platforms have made a positive impact on lowering the first three barriers listed above. Indeed, if not for technology, many small to mid-size businesses (SMBs) would have never survived the pandemic. According to Facebook’s September 2021 Global State of Small Business Report, digital tools positively impacted 69% of SMBs worldwide during the pandemic. In the U.S., 76% of SMBs reported in an SBE Council survey that cloud services and tech were critical to their survival and operations during the pandemic.
We are also seeing massive growth in the use of online platforms by startups and SMBs to raise capital. For example, in the U.S., Crowdfund Capital Advisors reports that more than $1 billion has been raised via investment (regulated) crowdfunding, with over 1.2 million investors backing 4,500 companies since this alternative became legal several years ago. SMB and startup-friendly regulatory improvements transformed what started as an alternative and clunky form of raising capital into a more mainstream and affordable one. Investment crowdfunding truly is democratizing access to capital, and it would offer great hope to entrepreneurs everywhere if nations allowed investors outside their borders (as they do in Israel, for example) to invest in their small businesses and startups using these regulated platforms.
And this brings me to what I see as a worrisome development. While tech platforms have expanded the reach and customer base for many entrepreneurs and small businesses – especially during the pandemic when the use of online commerce and digital tools grew massively by consumers, small businesses and governments alike – many countries are working to hyper-aggressively regulate the larger platforms that have expanded opportunities and markets for entrepreneurs and SMBs. Again, these platforms have vastly lowered costs and barriers for entrepreneurs. Government actions that erect new barriers, or establish old ones, may end up harming the startup ecosystems that countries are working to make better.
If governments and elected officials value entrepreneurs and want to encourage more entrepreneurship, they must connect with entrepreneurs. The pandemic has upended old systems and vastly accelerated our digital world. Listening to the needs and experiences of entrepreneurs during this critical period will help governments develop a sensible and effective policy framework for recovery and growth. If governments and elected officials want to fuel entrepreneurship, they must give entrepreneurs an early and meaningful voice in critical policy discussions.