During the pandemic, millions of people lost their jobs and research reveals that many of them went on to become entrepreneurs. In many ways, the past two years were the perfect opportunity for entrepreneurship to blossom. After all, between the retrenchments and the Great Resignation, there were a ton of people sitting at home with time on their hands and bills to pay – not to mention the maddening sense of claustrophobia induced by repeated lockdown mandates. These elements proved to be the perfect combination for a hot pot of freelancing, digital nomadism, and entrepreneurship.
But does this mean that we are in the era of the entrepreneur? And if so, what does this mean for society?
The entrepreneurial trend
In 2020, there were 4.5 million new business applications in the US – an increase of 24% from 2019. And it looks like this trend is here to stay, at least for the next few years.
According to Finances Online:
The bulk of entrepreneurs are aged between 40 and 59 years (25% are in their 40s and 35% in their 50s)
People in their 60s constitute 18%
Those in their 30s constitute 14%
18-29 year-olds account for the same percentage of entrepreneurs as those over 70 years
However, this particular statistic does not consider children. According to another survey 62% of Gen Zers and 50% of millennials are planning to start a new business. Even kids are contemplating entrepreneurship! For instance, Henry Langer started his own artisan chocolate company, Sweet Henry's, at the age of 11 – and his website looks pretty impressive.
It's not unusual for recessions to lead to surges in entrepreneurship. While new business applications slumped in the Great Recession of 2008 and 2009, the rate of entrepreneurship actually rose because people who had been retrenched needed to find other ways of making ends meet. Out of this difficult period came a plethora of sharing applications, such as Airbnb, Slack, Uber, Pinterest, and Groupon.
Rashmi Menon, entrepreneur in residence at the University of Michigan's Zell Lurie Institute for Entrepreneurial Studies, says that, "anytime you have a big change, whether that's an economic downturn or something like COVID, it brings up new needs." And startups may excel in economic downturns because resources such as office space and people become cheaper while large incumbents are weakened.
However, not everyone is cut out to be an entrepreneur.
What makes an entrepreneur?
While becoming an entrepreneur is encouraged, especially in the US – the land of the American Dream – succeeding as an entrepreneur is far from easy. Let's look at some stats collected by the US Small Business Administration and other researchers:
Only half of new businesses survive five years or longer
Only a third make it to the 10-year mark
42% of businesses failed because their products or services didn't serve a market need
Another 17% marketed products that were not user-friendly
To succeed as a new business owner, you need to offer a product that people want or need and you have to meet this want or need in a new way that differentiates you from what's already out there.
What research has found is that becoming an entrepreneur is all about mindset. An entrepreneurial mindset is one in which you have a vision of what you want to achieve and you continue to find ways to make this a vision a reality. As Rachel Hannan of BHP Consulting writes:
"[Entrepreneurs are] willing to innovate and take risks, to do things differently or introduce new ideas that will make things happen. They accept that setbacks and obstacles are inevitable on their journey, and not an excuse to give up."
If you have an entrepreneurial mindset, you're guided by purpose and constantly look for improvements that you can make to better transform your ideas into reality.
New opportunities for entrepreneurs
Here are four areas that show great promise for today's entrepreneurs:
Technology: Thanks to the acceleration of digital innovation, there's capacity for today's entrepreneurs to grow within the space of tech and increased connectivity across the Internet of Things. The potential for new businesses that use 5G, AI, machine learning, VR, and AR are boundless. And, thanks in large part to the pandemic, it's now clear that you don't need a big office space – or even a team that live in the same country – to have a successful business.
Finance: Moreover, alternatives to traditional finance are on the rise, especially in the US, following the closure of 13,000 bank branches (mainly in rural areas) between 2008 and 2020. This presents a large opportunity for entrepreneurs in the fintech and decentralized banking space to provide banking services to rural and unbanked Americans.
Outsourcing: It's never been easier to outsource time-consuming tasks, which can help save you money and time. However, the drive to outsource has meant that new businesses tend to employ fewer full-time staff members than more established businesses.
Organizational agility: Organizations are becoming less hierarchical and rigid. There's a trend towards more flexible roles that remain open to changing responsibilities over time, and more flexibility in general. This is a great opportunity for many of the great resigners who may have left their organizations due to excessive rigidity in their positions or the feeling that their work was not truly valued.
The trouble with entrepreneurship
It's not all good news for entrepreneurship though. Some of the points of concern around startups today include the following:
1. Lack of full-time employees
While there are a great number of new businesses out there, the number of staff they employ appears to be shrinking. In 2020, the number of sole proprietorships rose, while those with staff fell by 2.4%. The trend implies that more businesses will employ independent contractors than hired employees. Worryingly, the Global Entrepreneurship Monitor's 2021/2022 report found that:
"In a quarter of the economies studied, over half of those starting or running a new business expects to employ no one but themselves in five years. This may be indicative of high levels of “informal survival” businesses, hinting at new start-ups as a means of survival in the absence of alternate income opportunities owing to the pandemic."
2. The disjunction between perception and reality
While entrepreneurship is on the rise in the US, Saudi Arabia, and the Netherlands, new business growth remains low elsewhere in the world. According to the Global Entrepreneurship Monitor's 2021/2022 report, entrepreneurship has declined by more than half in Poland, the Slovak Republic, and Norway. There appears to be a great disjunction between the perception of how easy it is to start your own business and the reality of how many people act on this perception.
While many people perceive starting a business to be easy in their country, very few start their own businesses. For example, in the UK, more than 70% of respondents for the report agreed that it was easy to start a business in their country, but fewer than one in 10 intend to start their own business in the next three years. This suggests that cultural change is needed to promote entrepreneurship through informed policy-making and more support for early-stage entrepreneurs, as well as better education geared towards entrepreneurship.
3. A failure in entrepreneurial education
Experts find that entrepreneurship education is failing across schools. Of the 13 ecosystem system conditions tracked, Entrepreneurial Education at School came in last place in 39 out of the 50 economies participating in the National Experts Survey in 2021.
There's great potential for entrepreneurs to create innovative businesses, powered by the latest advances in technology, plugged into the Internet of Things or the Metaverse, or making the most of Bitcoin and other aspects of BlockChain, but only once governments and education systems get fully on board with this program.
4. The flawed dream of the "side hustle"
One of the widest spread embodiments of entrepreneurship in 2022 is the "side hustle", the business that you're running on the side. More people have side hustles than you may think. According to one report, 43% of US workers who have full-time jobs run other businesses on the side, even though "full-time" often means more than 40 hours of work a week.
A side hustle can sound like a good idea when it means you're putting in a couple of hours here and there for great returns. And it can be essential if you haven't received a raise in months or even years. But having a side hustle can be exhausting on top of a full-time job, possibly leading to burnout or to decreased productivity at your main hustle. It could also lead to you neglecting your primary job, making a bad impression on your employer, and undermining your reputation.
It's also worth considering whether it's time for your "side hustle" to become your whole job – when you can go from hustling to running a legitimate, sustainable business. And, if you don't think you'll ever get there, perhaps it's best to keep the side hustle as a hobby rather than a hustle.
Entrepreneurial aspirations
As I wrote in my first article about Peter Thiel's book on entrepreneurship, Zero to One, entrepreneurs and startups are the creators of the future. They are the people who look at the problems we're facing and think of new and creative ways to approach these. Entrepreneurs are daring big-picture thinkers. They take risks, try and retry things – or "iterate" as Thiel puts it.
But starting something from scratch can be incredibly daunting, and going from zero to one is a big step. To take that step, you need a great deal of confidence in yourself and you need to be prepared to risk your own sense of comfort.
What does it mean for us if we are moving into an era of entrepreneurship? Does it mean that business as we know it will change? As we've seen with the Great Resignation, companies are needed to rethinking their hiring practices and the benefits that they offer so that they can attract and retain top talent, and many individuals are opting for more flexible working options including working from home and working flexible hours.
Are we entering the Red World or the Entrepreneurocene?
There are many possibilities for the future of work. If there's anything we've had drilled into us by now, it's that agility and adaptability are key to survival in a world of constant change.
The future of work is one of great opportunity but also many unknowns. According to PwC's report, there are four different worlds of work that could be our reality in 2030:
The Red World: a high risk world where new "ideas rule and innovation outpaces regulation". This world is the ideal breeding ground for innovation with businesses and individuals racing to give consumers what they want. It also includes the proliferation of digital platforms and tech that allow for specialists to flourish, with the downside that "[t]oday's winning business could be tomorrow's court case".
The Blue World: a capitalist world in which corporate is king and "bigger is better". In this world, corporations are massive and incredibly influential – some even more so than countries. In the Blue World, personal preference is more important than social responsibility and everything is about making a profit and keeping competition in the marketplace fierce.
The Green World: a world predicated on trust and social purpose. This world is one in which corporate responsibility is key, and issues of environmental responsibility, diversity, and human rights are placed at the forefront of business considerations. In this environment, organizations are beholden to the human rights of employees and consumers and are crucially aware of the social ramifications of their actions.
The Yellow World: the true sense of the anthropocene. This world centers on humanity's need for meaning and relevance at work. It's a place in which "[c]rowdfunded capital flows towards ethical and blameless brands", a world in which artisans, creatives and "new Worker Guilders" prosper.
Fun fact 💡: You can take a quiz on the PwC website to find out which world would best suit you! I got the Yellow World.
If the future of work turns out to fulfil the forecast of the Red World, then we may well live in a time of unprecedented entrepreneurship – with the risk of too few regulations. I can't quite picture such a free and risk-laden way of life becoming mainstream. If anything, I think the Red and Blue Worlds may well merge with each other.
What's clear is that the way the world of work is today will likely change dramatically all over again, and for those with an entrepreneurial spirit, finding ways to work with the latest technology and consumer trends may be the way forward.
What do you think?
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