COVID-19, a pandemic that occurs only once a century, has disrupted industries and lives around the world.
It has forced companies and employees to adapt to seemingly unprecedented and changing conditions on a daily basis. It created dramatic circumstances that fueled the need for survival – keeping businesses afloat and keeping groceries on the table and a roof over their heads.
It also created opportunities – both for established entrepreneurs and those with entrepreneurial instincts. Entrepreneurs, of course, did not escape the negative economic impact and pressures of the pandemic, but they found and pursued ways to survive and thrive through the crisis.
In fact, according to Babson College’s new 2020/2021 U.S. Global Entrepreneurship Monitor (GEM) report, half of entrepreneurs in 2020 said they were motivated to start a business because jobs were hard to find, up from 22 % compared to 2019, published on Wednesday. The report also found that 54% of business owners and 43% of business owners said the pandemic had opened new business opportunities.
Read the full 2020/2021 U.S. report from the Global Entrepreneurship Monitor.
“People can have different reasons to start a business: for example to generate income or to see new opportunities, but the GEM results show that people still turn to entrepreneurship even in a social and economic crisis”, said Smaiyra Million P’21, executive director of the Arthur M. Blank Center for Entrepreneurship at Babson College.
Challenges and opportunities
The latest US GEM report offers a comprehensive look at the impact COVID-19 is having on entrepreneurs and business owners six months after the pandemic began disrupting life and business in the US.
“The United States has long relied on entrepreneurs to drive innovation, job creation and economic growth,” said GEM US team co-lead and professor of entrepreneurship at Babson College Donna Kelley, P’24. “There is no question that the COVID-19 pandemic has created both challenges and opportunities for entrepreneurs and mature business owners.”
The report, which surveyed more than 2,000 American adults in August 2020, showed that the total rate of early-stage entrepreneurship (TEA) – which measures the percentage of adults ages 18 to 64 years old who are actively starting up or Running a new business – slightly decreased in 2020. The rate of 15.4% (compared to 17.4% in 2019) corresponded to the rate reported in 2018.
“The GEM results show that people will still turn to entrepreneurship even in a social and economic crisis.”
Smaiyra Million P’21, Executive Director, The Arthur M. Blank Center for Entrepreneurship
Critical findings from the GEM report from the first six months of the pandemic include:
- About 40% of Americans knew at least one person who closed a business due to COVID-19, although 21% knew someone who started a business.
- 82% of entrepreneurs felt that starting a business was more difficult, and nearly 70% identified the pandemic as a setback to their company’s operational readiness.
- Among the incumbent business owners, 58% stopped some of their core business activities due to COVID-19.
Of those who closed a business, more than a third cited the pandemic as the reason.
- Despite the hurdles, however, the conclusion of the report is clear.
“It shows the importance of entrepreneurship to the US and global economies,” said Jeffrey P. Shay ’87, MBA’91, executive director of academic operations at Babson College’s Arthur M. Blank School for Entrepreneurial Leadership.
Data on black and female entrepreneurs
However, the new GEM report looked at more than just the pandemic. Other key findings included insightful data on the health of black and women entrepreneurs.
In particular, the report shows that black people are twice as likely as white people to have entrepreneurial intentions (20% versus 10%) and almost twice as likely to start a business (26% versus 14%). However, black entrepreneurs are half as likely to run mature businesses (5% vs. 10%) and report business closures (6% vs. 4%) more often than white entrepreneurs.
Yulkendy Valdez ’17 (left) and Josuel Plasencia ’17 founded the Boston-based Project 99, which helps companies teach young employees and their managers inclusive leadership skills.
Shay points out a variety of factors, including greater difficulty and fewer opportunities to raise capital, that can be critical to building and growing successful businesses.
“Does this have to do with other features of our economy that we already know?” Asked Shay. “We know that in many established companies we are now trying to make changes to address issues related to equity and inclusion. Similar changes need to be made to give black entrepreneurs better access to seed and growth capital. “
Meanwhile, the GEM report showed that the TEA rate for women was 16.6%, after the TEA rate for men was 18.3%, meaning that for every ten male entrepreneurs there are about eight women entrepreneurs. However, more men than women reported having closed a business before 2020: 6.8% of men (an increase of 24% compared to 2019) and 5.4% of women (an increase of 13% compared to 2019).
“The GEM report highlights the fact that there are many black entrepreneurs who wait on the sidelines and want to get on the escalator to get it right,” Shay said, “so the report supports efforts to increase opportunities . ”
I’m looking forward to
As the United States and the world continue to meet the challenges of the pandemic, the GEM report offers insights that can help fuel entrepreneurship and pave the way forward.
“Stable jobs and economic vitality depend on the survival and growth of companies,” said Kelley. “This research can help make decisions that support entrepreneurship in America, which is sure to make a vital contribution to the post-pandemic recovery.”
For example, Shay says the report is important reading for policy makers and decision makers. “We want it to be in the hands of every governor, senator in the United States, and we want the Small Business Administration to read this report,” Shay said. “That’s the kind of value this report has.” Shay says it should be used in policy making, such as prioritizing support for entrepreneurs and entrepreneurial activities and easing the burden on small businesses.
With the new report, which provides the first in-depth look at the pandemic that continues to affect industries and people, GEM’s work continues to be valuable, highlighting in particular the importance of an entrepreneurial mindset even in a crisis.
“Much like the Great Depression or World War II, the pandemic promises to be a transformative event where the society we knew will be reshaped and filled with change and opportunity, and entrepreneurial leaders will lead the way,” said Stephen Spinelli., President of Babson College Jr. MBA’92, PhD. “GEM will be there to witness and capture this extraordinary moment, and through research we will continue to understand and learn from entrepreneurs and help them shape the world of tomorrow.”
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