Our guest blogger, Dale Fickett (pictured left), is the President & Co-Founder of RVA Works, a public charity that cultivates social impact through entrepreneurship and innovation, as well as offers educational and financial services due to the generous support of over 50 program sponsors and volunteers. Throughout his career, Fickett has served in various economic advisory roles, specializing in the areas of developmental economics, impact investing and social entrepreneurship, and has lectured and published related research at several universities across Virginia and the United States.
How should we think about new business formation and innovation in the post-pandemic environment, and what can we do now to prepare for it? In this post, I’ll lay out several of the trends impacting the entrepreneurial landscape, as well as some of the challenges and opportunity spaces for stimulating entrepreneurial activity.
A natural starting point would be the economic context within which people are undertaking the business of creating a new venture. Economic output as measured by Gross Domestic Product (GDP) is expected to increase by 6.5% in 2021, the highest annual output since 1984 and a significant upgrade from previous estimates. The official U3 unemployment rate stands at 6.2%, versus 3.5% prior to the pandemic. The Federal Reserve is signaling a willingness to continue loose monetary policy, and as such we’re seeing inflationary expectations priced into the bond market. Yields on the 10 year treasury were 1.658% at the time of this writing, a significant increase over the August 4th low of 0.51%. The steepening of the yield curve is reflecting investors’ inflationary concerns, and we’re seeing a general a shift towards value stocks.
Within this context, entrepreneurs are considering the following:
- Navigating a fairly low interest rate environment, for those able to access debt finance
- A strong residential housing market and the opportunity to tap one’s home equity to minimize cost of capital
- Additional policy responses for capital access, such as PPP, EIDLE and the Main Street Lending Program
- Prospects for increased consumer demand as people return to work
- A resurgence of other latent demand as many people have postponed discretionary spending, e.g. tourism
We’ve already witnessed the 2020 surge in new business filings, and post-pandemic we can expect even more. Entrepreneurs will continue organic creation of work-from-home businesses in professional services and freelancing, including part-time startups for those employed full time. We can also expect a continuation of the residential construction activity, yet continued pressure on office-based commercial leasing and co-working. A gradual return to public spaces should augur well for entrepreneurs in food-based businesses and those providing personal services. Technology-enable disruption in retail, exacerbated through the pandemic, will continue the shift to at-home shopping – a benefit for niche entrepreneurs providing shippable products for consumers.
How to best support this activity is an important corollary. The creation of support systems should respond to the longer-term demand for services from entrepreneurs. The support service providers are often much less dynamic than the founders for which they are developed to assist. They are often embedded within university systems, corporate venturing initiatives, and public sector offices. Thinking should thus have a longer-term focus, and reflect the broader contextual changes at play:
Traditional business planning is being supplanted by lean canvas, design thinking and faster iterations of customer feedback, providing earlier insights for product-market fit. Product development lifecycles are being shortened and data driven. Documentation, such as lengthy market research reports, is only relevant at the point-of-need; and most founders rightly focus on speed-to-sale as the primary gauge of business viability.
As connective technologies break down geographic boundaries and adoption rates accelerate, diaspora are addressing overseas opportunities earlier, crowdfunding is continuing to democratize early-stage access to equity capital, and distance education means less regional allegiance. Virtual teams are no longer constrained by the need to physically meet, and angel investors will potentially consider deals for founders with whom they’ve not met in person. For example, I’m currently on three separate teams that involve international collaboration with representatives in Taiwan, Liberia and Haiti.
The advent of the Sustainable Development Goals, assessments for measuring Social Value Creation, and the focus on inequalities for marginalized people, have all meant that many entrepreneurs are choosing to solve problems with social and environmental considerations. The cross-cultural focus is much more about collaboration, authenticity and trust-building. This elevates the value of individual reputation and the referral as currency. It highlights, more than ever, the need for integrity. Today’s competitors are tomorrow’s supply chain partners. Authenticity stems from shared experience, and entrepreneurs best learn from others who are actively engaged within business building.
Approaches to assist these entrepreneurs, and to re-imagine entrepreneur-led economic development, will include inspirational narratives promoting individual ownership, ingenuity and perseverance. It will also include intentional pathways to business ownership, for the economically and socially disadvantaged. Across the range of philanthropic, corporate, government and academic stakeholders, it will include mutually beneficial projects that provide entrepreneurs access to timely, and nonduplicative information that speeds their “access to a sale”, by providing a mix of educational, financial and connective resources. It will increasingly mean empowering multi-ethnic coalitions creating market-based solutions to the most pressing social challenges of our time.