Over the past weeks, the team of Times of Entrepreneurship has done amazing work covering the impact of the COVID19 shutdown. We had some of the earliest stories on the problems in the economic stimulus, broke the news of the tech lenders joining the PPP program and wrote about the vastly underreported story of community loan funds. To bring our readers the best insights, we talked to experts from Karen Mills, the head of the SBA under Barack Obama, to small business owners like Ginger and Josh Routh, who run Minnesota-based Circus Kaput.
Our reporting allows us to recognize the breadth of the community of entrepreneurs, and how we are all interconnected. When legislators and policymakers in Washington, D.C. designed the programs for economic aid, they did so through a set of blinders that might as well have been manufactured in the 1950s. Entrepreneurs in America are no longer solely or mostly white men with payrolls of full-time employees. That misperception is driving a huge problem with the stimulus: It’s been created to get million-dollar aid packages to a handful of traditional businesses, when instead it should focus on how to reach 50 million mostly tiny businesses with small sums, of $10,000 or $20,000.
Foundry Group managing director Seth Levine and I wrote an op-ed about this for CNBC. You can see the full op-ed here: To save the economy, policymakers need to understand small business 101.
Some of the highlights:
Some 90% of the typical businesses in America — a salon, corner shop, restaurant or fitness center, those hit hardest by the current crisis — employ fewer than 20 people, according to data from the Census Bureau’s Annual Survey of Entrepreneurs.
Overlapping with these businesses – sometimes they are owners, sometimes employees — are the 57 million Americans who freelanced in 2018 (what’s popularly termed the gig economy), according to the Upwork: Freelancing in America Survey.
Don’t make the mistake of thinking that because a business is small or a solo business, it isn’t valuable or an economic driver. It’s precisely through networks of entrepreneurially minded people that social value is created, innovations start and fast-growing companies that produce jobs are born.
The entrepreneurs of the future are women, people of color and immigrants (who are also the entrepreneurs of our past). The number of women-owned businesses increased 31 times between 1972 and 2018, according to the Kauffman Foundation.
The aid programs themselves need to be expanded to offer more assistance, and assistance based on need beyond that calculated by the limited metric of payroll, to more businesses.
If we don’t get this right, we have the recent past for evidence of what will happen. During the Great Recession of 2008 and shortly thereafter, the net number of new firms created in the United States was negative: More companies closed than were being started. The result was 117,000 fewer companies in 2014 than there were in 2007. Entrepreneurship rebounded, but only in a few places. In the 30 years leading up to the Great Recession, 80% of metro areas saw an increase in the number of firms annually (a period that includes prior recessions). This trend was completely reversed by the Great Recession, after which only 20% of metro areas have seen an increasing number of companies created.
Our entrepreneurial spirit unites America. When it falters, our divides grow.