Microenterprises flourished during the pandemic. We must now harness their full potential.

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Amid the economic turmoil of the past two years – with nearly 30% of small businesses shutting down during the height of the pandemic, workers leaving their jobs at historic rates and continued disruption to the global supply chain – a positive trend has manifested itself: A record number of Americans have launched microenterprises online.

According to Venture Forward, a multi-year research program by GoDaddy to quantify this entrepreneurial activity, Americans created 2.8 million more online microenterprises in 2020 than in 2019. Online microenterprises are defined as businesses with a name discrete domain and an active website. About 90% of these online businesses employ less than 10 employees, and nearly 17% of the 20 million micro-businesses tracked in the United States were created after the start of the pandemic, according to the latest national survey from Venture Forward.

This increase corresponds to broader entrepreneurial trends. The number of independent and unincorporated Americans reached 9.44 million in October, one of the highest numbers since the 2008 financial crisis, just behind July and August of this year. It came a month after 3% of the US workforce (4.4 million Americans) left their jobs, a record high.

Several factors may explain the boom in online microenterprises. Soaring unemployment rates in the first months of the pandemic forced millions of people to seek new sources of income. Pandemic relief checks have likely helped some people start new businesses. And compared to previous recessions, potential entrepreneurs now have more widely available broadband, greater digital fluidity, and a more mature e-commerce marketplace that makes website building, marketing, and business easier. online sales. Today, it’s much easier to translate a craft hobby or creative passion project into an online business than in 2008.

Recent research from Venture Forward suggests that these lowered barriers, which make it easier for microenterprises to generate new jobs and income, are helping the economy weather economic shocks such as the pandemic. Many recently launched microenterprises are either too new or too small to appear in traditional economic data such as employment reports or new business registrations. But a unique dataset of 20 million microenterprises with domain names registered with GoDaddy exposed their economic impact, which was largely invisible to policymakers.

Working with data from Venture Forward and financial backing from GoDaddy, economists at UCLA showed that a 1 percentage point increase in the microenterprise index (a composite of factors that measure the success of microenterprises in line) can lead to a reduction of 0.12 percentage point in unemployment. And while 39% of microenterprise founders surveyed by Venture Forward said their business is currently an additional source of income, 67% of them would like their microenterprise to become a full-time job. Currently, about a quarter of microenterprise owners surveyed earn more than $ 4,000 per month from their business.

After the onset of the pandemic, online microenterprise ownership grew fastest among the groups hardest hit by the economic fallout. Black owners make up 26% of all new microenterprises, up from 15% before the pandemic. Similarly, women-owned businesses jumped to 57% of new microenterprise start-ups, from 48%. Microenterprises have also become a more popular option for people without a college degree, dropping from 36% to 44%.

It is not abnormal that “entrepreneurs of necessity” – people driven into entrepreneurship after job loss or income decline – turn to self-employment during recessions. But this wave of microenterprises is too large to be fully explained by entrepreneurship out of necessity and deserves more attention from policy makers to understand how these nascent owners can be supported. Like businesses of all sizes, access to capital is a major concern at start-ups, but 63% of microenterprise owners who started after 2020 needed less than $ 5,000 to get started, an amount that traditional banks do not. are not optimized to provide. Universal broadband access remains essential for an increasingly web-native wave of entrepreneurs. And as Pamela D. Lewis, a non-resident lead researcher at Brookings Metro, argues, local economic development strategies may seem different for microenterprises than for large enterprises, requiring distinct interventions related to networking, hands-on assistance, and development. mentoring.

Ultimately, a change in mindset is as important as a change in policy. Many local economic growth policies focus on target industries or pursue well-documented measures such as job creation. But microenterprise owners do not fit perfectly into traditional economic development strategies. They do not see themselves as part of a larger industry and generally do not seek employment. They follow a passion, not an industry, and need access to skills training, capital and affordable broadband rather than a career fair.

Policymakers at all levels of government have tried to help small businesses across the country survive the pandemic, but this boom in online microenterprises has occurred with almost no consideration of their specific needs. Now, with the new data available in hand, it’s time to change that and find out how much of a boon this growing part of the economy can be.


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