Business formation is set to hit its highest level in years in the US, whilst startup funding worldwide hits new records.
No less than 4.3 million new business applications were filed in the US last year, which was 23 per cent up on the year before and comfortably the best year since 2004, which is as far back as data on the US Census Bureau website goes.
That was impressive, but 2021 is almost certainly going to be a lot better. By the end of August, new business formations were around 900,000 up on the first eight months of 2020.
But the US is not alone. In the first half of this year, venture capital investments into South-East Asian startups hit a new record.
In France, it has been a bonanza year for startup funding, with the third week of September seeing the highest weekly level of investment into techs ever. https://sifted.eu/articles/france-startup-record-week/
In the first half of 2021 in the UK, tech startup investment hit a record $18 billion.
Of course, new business formations and VC funding is not the same thing, but the US, UK, France, Germany and Japan all saw a big jump in new business foundations at the end of last year. For 2020 as a whole, the UK saw 770,000 new businesses, a new record.
This all begs the question, why? Why are so many new businesses being formed?
Desperation is clearly a factor — sometimes creating a business is the only option for workers made redundant.
Covid related furlough schemes must have helped; after all, has there been a better time to focus on your 'side hustle' than when you are not working, but a significant proportion of your wage is still being paid under a furlough scheme?
Some consumers are flushed with money — especially those who could save during the pandemic, creating demand for new types of services and products.
But is it not likely that the primary explanation relates to the pandemic related accelerated shift towards digital and working from home.
Funding an office used to be one of the biggest costs associated with setting up a business.
Digital technologies also means a lower barrier to entry, typically. An online retailer, for example, doesn't need a store.
Companies like Amazon have made it much easier for companies to sell their products online without ever handling them directly.
For many companies, the agile approach to business means they need more freelancers and contractors — a pool of talented workers you can tap into virtually at will.
In the UK especially, the 2008 crash was followed by a surge in tech entrepreneurship— this was partly down to a deliberate policy by the Cameron government to support tech startups.
In London, in the wake of the financial crisis, we saw the gradual emergence of Silicon roundabout, for example.
But the 2010s startup scene was also characterised by the rise of co-working, where entrepreneurs armed with a laptop and supported by decent internet connectivity could mix with like-minded people, only paying a modest overhead cost for their office.
Post pandemic, instead of co-working, we see home working, probably combined with occasional networking opportunities. But the new networking tools have largely involved discussion forums using tools like Telegram or Guild and live open discussions over Zoom or other communication tools, sometimes forming webinars, as entrepreneurs find quite new ways to communicate with peers, corporate customers and investors.
But governments can do more to support this incredibly exciting and uplifting transition. Techopian has become a fan of universal basic income, influenced partly by the people we have spoken to as part of our video series on this topic.
Universal basic income could be a powerful tool in supporting entrepreneurs. Not all entrepreneurs are independently wealthy or can tap into family for support. By providing a guaranteed subsistence income, universal basic income can give entrepreneurs a safety net and support during the early bootstrapping phase of a business.
If UBI is too big a step for governments and their electorate, then at the very least, a startup founders basic income would help.
ESG isn’t about ethics; it’s about profit — is that right?
Mar 30, 2022
Will remote working and calls for four day week lead to people taking in 2 jobs?
Mar 28, 2022
How has the pandemic changed businesses’ telecommunications requirements, and what are the potential challenges?
Mar 17, 2022