When will the big company die? In the second year of a pandemic that has caused the world’s most severe economic crisis since the end of the war, it’s an obvious question. And yet, American economists are currently recording a completely different phenomenon, if not the opposite: never since the introduction of statistics so many people have founded a business or created their own business in the United States than between July 2020 and June 2021 of all places. With the outbreak of the Corona crisis, an average of around 300,000 start-ups were registered with the authorities each month. Since the middle of last year, there have been as many as 550,000 per month.
How can that be – after all, the development during the last great crisis of 2008 and 2009 was exactly the opposite: the number of company registrations plummeted and it took years before they were born. ‘reach the level that was previously common. The fact that the trend is in the opposite direction this time around – after a brief slump at the start of the pandemic – may be due, among other things, to the fact that some Americans were simply forced to try and become self-employed after losing their jobs.
Additionally, there are two factors that are actually fundamentally different from 2008. This is shown by studies such as those presented by John Haltiwanger, professor of economics at the University of Maryland, College Park, among others.
Factor one: the money available. When the financial crisis erupted in major industrialized countries more than a decade ago, it made life twice as difficult for business founders: real estate and stock prices collapsed and fell. many citizens have become impoverished, at least on paper. In addition, the banks went bankrupt in a row, and the ones that survived made hardly any loans. As a result, many potential creators lacked a resource essential to the vast majority of young companies: capital.
Sometimes it only takes a few weeks between the idea and the start of the activity
This is not the case today, quite the contrary. Thanks to generous government aid and economic stimulus packages, steadily rising stock prices, and significantly lower spending on travel, restaurants, and theater tours, millions of Americans now have more money at their disposal. than in many normal years. At the same time, banks are lending generously, and many investment firms are desperate for start-ups to invest in.
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In New York City, the pandemic has created an almost new genre: outdoor dining.
(Photo: Richard B. Levine / imago images)
Factor two: At least in some industries, it’s much easier to start a business today than it was ten years ago. The most obvious example is online commerce, where with the help of platforms such as Amazon, computer programs such as Shopify, and payment services such as PayPal or Stripe, sometimes only a few weeks between the business idea and the start of the business. . It is no coincidence that one in three companies founded in the United States in the past twelve months originated in this region. According to Haltiwanger in his analysis, the pandemic has likely further accelerated the already existing trend away from stationary commerce and online commerce.
However, new entrepreneurs have opened a lot of actual stores as well, but mostly in areas where rents are lower than in metropolitan areas like New York or San Francisco. Industries and sub-sectors that currently also register a particularly high number of start-ups include the freight forwarding industry, consulting services, laundromats and – perhaps surprisingly – the hospitality industry. In New York City, for example, hundreds of restaurants have closed since the Corona crisis began, but there have been many new openings at the same time. Additionally, the pandemic has created a whole new genre that has never existed in the city before – alfresco dining. At the start of the crisis, these were still quickly sheds in which the owners, plagued by lost sales, received guests, but now there are often pretty well-enclosed terraces and bars which, according to outgoing Mayor Bill de Blasio, will remain after the end of the pandemic are allowed to stay.
Ultimately, more than six million people have registered a business or independent business with U.S. authorities since the start of the pandemic. The 550,000 registrations in July 2020 were by far the highest value on record in a month. After the curve has flattened in the meantime – to a high level – the values are now close to the record level again. It is not yet clear how many new businesses will survive in the medium and long term. Experience teaches: probably not even one in ten.