Startups: New Businesses in The Pandemic Era

It may be surprising to learn that startups in the U.S. are on the rise right now. But data shows that indeed entrepreneurs are creating new businesses in spite – or as a result – of COVID-19.

“This pandemic is actually inducing a surge in employer business startups that takes us back to the days before the decline in the Great Recession,” said John Haltiwanger, an economist at the University of Maryland, in a story published in The Wall Street Journal.

The U.S. Census Bureau reports that new businesses are being formed at the fastest rate in more than a decade. Applications for the employer identification numbers that entrepreneurs need to start a business have passed 3.2 million so far this year, compared with 2.7 million at the same point in 2019, according to the Census Bureau.

Nationwide, new business is up 20 percent year over year, according to Census data cited in a story by Miles Bryan for NPR.

“By early June, applications to start new businesses climbed back up towards pre-pandemic trends. But then they kept on climbing,” said Kenan Fikri, research director at EIG, in the story.

Not That Surprising

The uptick in new businesses isn’t surprising if you look at entrepreneurial trends in other eras of uncertainty.

“Times of crisis, after all, drive creativity and innovation,” writes John Ramptom, founder of the calendar productivity tool Calendar, in an Entrepreneur blog post. 

Rampton points to past examples in history when entrepreneurial ideas were inspired by uncertain or down economies, including following the Great Recession, when Airbnb was founded as an alternative for people who were priced out of hotels.

“Airbnb, and many other examples that fueled desire for alternative income in 2008 and 2009, were born from loss — we lost 533,000 jobs in 2008, the biggest drop since 1974,” writes Adam Singolda in a CNBC post.

Besides Airbnb, Credit Karma, Uber, Slack, Venmo and Square were also launched as a result of the economic recession, he notes. “These companies were successful because they looked outside for opportunities as times changed, and came up with products and services the world needed.”

New Ideas, Launches Prompted By Necessity

A survey of 450 entrepreneurs by JustBusiness indicates that more than 1 in 5 entrepreneurs are starting businesses that were not planned before the pandemic.

“The pandemic was the catalyst for many entrepreneurs,” writes Eric Goldschein, partnerships editor at JustBusiness and Fundera, in a post about the survey.

Some of the newest entrepreneurs started a business after a job loss or related economic impact from the pandemic.

That’s what Ian Oestreich in Madison, Wisc., told local media. He decided to tap his bike repair know-how and opened a mobile business, Backyard Bicycles, after the pandemic shut down gyms, putting his job as a fitness coach in jeopardy.

“Bike repair is something I’ve done since I was a kid, so it’s one of my skills,” he said in an interview with WMTV in Madison. “I figured, why not?”

For Derwood Shelby, the idea for his own business came years before the pandemic. But after losing his job as a food and beverage supervisor in Philadelphia, he decided the time was right to pursue the idea.

He launched Selby Signature, selling produce and a specialty line of olive oil and balsamic vinegars at local farmers markets, he told NPR.

Similarly, Danielle Payton says her new idea for a company came after seeing her publicist business starting to wither when fitness studios – her key client base – started shutting down due to the pandemic. She saw fitness instructors holding free classes on Instagram Live.

“They were giving away their livelihood,” Payton said in The Wall Street Journal story by Gwynn Guilford and Charity L. Scott. “Free is not sustainable. Our haircuts aren’t free, our rent isn’t free...Nothing is free.”

In response, Payton and Rachel Siegel founded kuudose, an online workout-class platform that pays instructors monthly commissions for the members they bring on. “Fitness should be affordable and accessible to all, but everyone needs to make a living,” says Payton in the story.