Pandemic Fuels Global Growth Of Entrepreneurship And Startup Frenzy
By Yusuf Berkan Altun
The global pandemic has brought about a true boom in startups, as the number of new companies around the world has significantly surpassed the indicators of last year. Such a surge in entrepreneurship is being attributed to workers who were laid off and started their own businesses.
The Financial Times reports, citing official state statistics, that a boom in entrepreneurship in many countries has been recorded against the backdrop of the coronavirus pandemic of 2020:
• In the United States, in July 2020 the number of applications for starting a business reached its all-time highs of 551,657 00 an increase of 95% compared to the same period in 2019, according to the Census Bureau.
• In France, 84,000 new businesses were registered in October, according to McKinsey. This is a historical maximum and a 20% increase from the same month in 2019.
• Japan registered 10,000 new businesses in September 2020, up by 14% over the same month in 2019.
• In the U.K., the number of registered companies increased by 30% year on year in November and December 2020, according to the National Statistical Office. Startups have grown in the double-digit values since June.
Startups are trying to respond to changing consumer demand by opting for the logistics, delivery and IT industries. For example, according to an analysis conducted by the University of Kent, online trading was the driving force behind the startup boom in the first 11 months of 2020 in the UK.
Based on my observations, the number of startups in the IT industry grew by 20% compared to 2019, with growth rates peaking in the last quarter of 2020. Evan Luthra, CEO of Startup Studio Online, which provides technical and financial support to IT startups, previously stated, “Most of the new technology startups are associated with the telecommunications market, decentralized technologies, and biomedicine. We are also seeing successful attempts at digitizing areas that previously existed solely on the basis of offline sales, for example, real estate.”
Real estate has truly seen the introduction of digitization over the course of 2020, when viewings of properties were diverted into the online environment. Some startups have caught on to the online trend and started offering specialized services tailored to the industry. An example is Witly, which offers real estate agents the opportunity to promote their ads through Facebook and other channels. The service positions its solutions as convenient time-savers and CRM instruments that allow real estate agents to focus more on finding clients than on administrative tasks.
Andy Ann, co-founder of YAS Insurance, tweeted that the pandemic has sped up insurtech innovations. First “insurers are more profitable as there are less claims with massive WFH work and less activities, meaning fewer claims. Covid has also fast-tracked Insurtech and the future of insurance to offer on demand, anytime, anywhere and on a subscription basis.” Insurtech companies like YAS have learned about how people’s lives are changing and have started offering customers more flexibility on policies and terms.
One of the more niche examples of digitization that has arisen as a result of the pandemic can be found in the locum industry. U.K. startup Locumotive was among the first to offer locum opportunities through a convenient mobile application. The service offers built-in communication channels with stores and streamlined management of user invoices, expenses and payments.
Other opportunities being digitized include the programmatic advertising market, which has seen considerable growth in light of the shift to online in the majority of industries. Forecasts predict an increase to $147 billion in programmatic by 2021, along with proof that the share of programmatic within total digital media spend rose to 69% in 2020 and is projected to rise by up to 72% by 2021. Crowdfunding has also been on the rise, with new platforms offering projects of every kind and opportunities for attracting capital investments. Other areas that have experienced considerable demand are teleworking services, online conferencing, messengers, fitness applications and many others.
Oxford Economics U.S. specialist Gregory Daco noted that many new companies in the U.S. have a single founding employee. This, according to him, suggests that they are being opened by workers who have been laid off due to the pandemic. Such businesses are unlikely to become the main source of income for their owners but will help increase earnings in the gig economy, added Paul Donovan, chief economist at UBS Wealth Management.
Along with the numerous losses incurred by businesses as a result of the coronavirus pandemic, new opportunities have opened up for many entrepreneurs. Shutdowns in the worst-hit sectors have made room for new businesses that can now offer new products and better prices to customers. Those businesses that did not have online stores had to rethink their business model. Now is the time to pay attention to the growing demand for new virtual solutions and promptly respond to it by offering a new product like a virtual fitting room.
At the same time, offline costs can be significantly cut by reducing the number of warehouses and offices or renting them in areas with cheaper rental prices and by offering employees remote work. IT entrepreneurs should pay attention to crowdfunding platforms. Now the interest from private and institutional investors in new products on the market is higher than ever as fiat money continues to depreciate, making startups’ shares an attractive investment asset.
Analysts predict the rate of growth of entrepreneurship in the post-Covid-19 economy will continue to be high, despite the rate of vaccination of the population and the passing of the turning point in the fight against the pandemic.
Such a natural accelerator of startups as the pandemic has undoubtedly had a positive effect on the global economy. These developments on the individual entrepreneurship level are likely to aid numerous economies to quickly defeat the consequences of the pandemic. However, at the same time, some of the newly formed enterprises may not be able to withstand competition or find an application and are likely to quickly go bankrupt.
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