Startups are surging. Really, really surging. If you don’t believe me, just check out the data.
According to the Census Bureau, applications to form new businesses in 2020 totaled 4.4 million – a 26% jump from 2019. And new business applications continue to climb this year, with 3.2M new business applications filed from January to July 2021.1
That’s a huge increase. People are becoming entrepreneurs. It's happening everywhere and it's happening in just about every industry.
Atlanta’s business hub is booming, leading Georgia to clock nearly $2 billion in venture capital investment this year to date – more than all of 2020.2 In New York City, companies have pulled in an almost-record setting $7.6 billion in venture funding.3 Texas saw a 73% jump in new business applications in May 2020 versus May 2021.4 In California, levels have cooled off slightly since the post-lockdown boom of July 2020 (with nearly 52,000 applications that month), but are still at all-time historic highs.5
It’s worth noting that the rate of mergers and acquisitions (for those who prefer to buy a business rather than start one from scratch) is up sharply as well6 (The Hartford has these considerations if you’re thinking of an M&A transaction).
What’s Behind the Startup Boom?
For starters, there's COVID-19. The pandemic was an unprecedented hardship that affected countless people and caused millions to lose their jobs. According to a survey by Gusto, a human resources firm, 51% of owners started their business out of an economic need and 1/3 did it because they lost their jobs. This trend, according to Gusto, “persists across men and women and all race/ethnic groups.” Unemployment benefits helped some workers, but many others were forced to do whatever they could do to put food on the table.7
“There are over 4 million people who have been displaced from the workforce because of COVID-19, and almost 3 million of those are women who, according to recent research, have and continue to provide an average of 3 hours more per day of non-paid care,” says Nicola Corzine, executive director of the Nasdaq Entrepreneurial Center in San Francisco. “The situation has caused a spike in new business applications. [It was] born from necessity and lack of access and opportunity for many. Women especially have had to build their own income opportunities. For some, starting their own business has been the fastest way to provide for their families.”
These new entrepreneurs became freelancers, independent contractors and small business owners. They drove Ubers, delivered food, designed masks and became virtual assistants. They opened Etsy stores and Amazon shops. They did this with little capital available, but with the hope that the income generated by these side-gigs would make the difference. And for many, it did.
“In the middle of the pandemic, there were some industries that were impacted more than others,” says Jena Andres, co-founder and head of CX and marketing at Welcome, Inc., a virtual event startup which was formed during the pandemic. “For the events industry, COVID brought it to a complete stop. We knew that the pandemic would be a catalyst for how we gather now and into the future. That's why starting Welcome made complete sense to us.”
Being able to easily create websites, social media accounts and a quick corporate image helped Welcome and countless other new businesses. Leveraging all the (relatively) inexpensive technology available to find remote help and conduct virtual meetings helped many people do from their homes what they could not have easily done just a few short years ago. It wasn’t just tactical ease, however. This was a chance to capitalize on long-held dreams.
“For many, the pandemic created a moment to pause and reflect on priorities for themselves and their families,” says Corzine of Nasdaq Entrepreneurial Center. “A slowdown of life forced people to look inward and assess what work meant and where their time should be spent. Many saw a need in society and in their communities, and that inspired new services, products and technology to address those problems and inequities. This heightened awareness gave rise to more entrepreneurs, especially community entrepreneurship.”
How To Scale Your Passion
Naturally, there’s more to launching a startup than passion and a plan. You must have, of course, capital. And there are only two forms of capital in business: time and money. If you’re considering launching your own startup, consider the following:
- Your time: Human capital means time. Do you have the time to do this? Is your significant other prepared for the time commitment you'll need to make for your startup to succeed? Are you and your family willing to sacrifice sleep, Netflix, baseball games and even your child's birthday parties to focus on the needs of your burgeoning enterprise? These are questions that need to be answered before jumping in.
- Your finances: You’ll need money. Hopefully you can rely on savings. But if you’re really growing, you’re going to need outside funds. Most people rely on “alternative funding options,” like family, friends, banks, crowdfunding, grants or even angel investors. Venture capital is an option, too. However, the truth is that most startups do not get venture capital funding (The Hartford offers a playbook on the pros and cons of debt and equity financing options).
- Your business plan: Regardless of the source of your funds, you need a business plan. It will serve as a vital, written document that tells your community – your investors, bankers, partners and key people – about your business and where you plan to take it. It's a document that anyone who is interested in giving you their money will absolutely read. It doesn't have to be hard.
- Your team: Depending on the size of your company and your financing plans, you may need to put together a board of directors – or at least company advisors. This board should be made up of people with industry experience and (hopefully) connections to support your company’s growth. Most startups offer a small percentage of equity to their board members and advisors in exchange for their time and knowledge.
Beyond the basics, Nasdaq Entrepreneurial Center’s Corzine cautions business owners on one more thing: Don’t do it all yourself. “Get support so you can stay true to your vision and your dream for your work, even on the hardest days,” she says. “Mentors are critical. They are your champions. If they aren't, find other mentors. At the end of the day, everything will change – markets, products, team – but the one through-line is you. Without sustaining yourself, there is no pathway to sustainability for your business.”
Grow mindfully and build your team thoughtfully. "We have to work harder and more intentionally to build a culture that people love," Ortiz says, reflecting on Welcome’s remote-only workforce. "There's nothing better than finding someone who understands your vision, shows up like an owner and takes your business even further."
But the biggest thing you're going to need is your own hard work. And dedication.
1 Business and Industry: Time Series / Trend Charts (census.gov)
2 Atlanta Business Chronicle, July 14, 2021
3 Crunchbase, March 26, 2021
4 Business Formation Statistics (BFS) (census.gov)
5 Business Formation Statistics (BFS) (census.gov)
6 BizBuySell M&A Insight Report
7 New Business Creation During COVID-19: A Survey of Pandemic Entrepreneurs, Gusto, May 13, 2021
Brought to you by The Hartford. The content displayed is for information only and does not constitute an endorsement by, or represent the view of, The Hartford.
Information and links from this article are provided for your convenience only. Neither references to third parties, nor the provision of any link imply an endorsement or association between The Hartford and the third party or non-Hartford site, respectively. The Hartford is not responsible for and makes no representation or warranty regarding the contents, completeness, accuracy or security of any material within this article or on such sites. Your use of information and access to such non-Hartford sites is at your own risk. You should always consult a professional.
