Assignment task: Post-COVID Entrepreneurship
The year 2020 is destined to go down in history as one of the most unforgettable years. Thanks to COVID, economies shut down one after another. Millions of people were sick, many died, and suffering was immense. All nonessential businesses closed, oil prices dived into the negative, unemployment soared, and firms-ranging from large ones to SMEs-were bankrupt left and right. How does the future of entrepreneurship hold in the post-COVID era?
One obvious view is that the entrepreneurial outlook is grim. Surviving SMEs confront a global economy where consumption is reduced and investment curtailed, necessitating some true grit. With so many businesses shutting down during COVID, many would-be entrepreneurs are likely to be discouraged. Seeking employment in established organizations may sound better than an entrepreneurial career. Even would-be entrepreneurs with a strong desire to launch their own businesses may want to wait. In addition to the usual hazard associated with entrepreneurship, it will be much harder to become successful when the economic winds are blowing in the face of entrepreneurs.
However, another view is that a burst of entrepreneurial activity will eventually arise following a slump. For a small number of industries such as personal protection equipment, telemedicine, online education, and grocery and meal delivery, an entrepreneurial boom is already happening-thanks to COVID. Beyond this relatively small range of industries, a new "swarm" of entrepreneurs may emerge-in the words of Joseph Schumpeter, father of the metaphor "the perennial gale of creative destruction." In terms of economic structure, COVID can be viewed as a "structural loosening" event, washing away nonviable business models and uncompetitive businesses. But at the same time, such structural loosening is bound to create new opportunities for new entrepreneurs to capture, if one has any belief in the nature of capitalism described by Schumpeter.
In some ways, a large entrepreneurial boom can already be observed, as evidenced by the recent rise of the applications for Employer Identification Numbers, which new businesses file with the Internal Revenue Service. Of course, we can debate whether this is driven by "necessity entrepreneurship" (desperate laid-off workers reluctantly launching new businesses, such as another restaurant taking advantage of real-estate vacancies) or "opportunity entrepreneurship" (truly passionate entrepreneurs capturing viable new opportunities) (see the Opening Case). But "just because it is out of necessity, that doesn't mean it's a bad thing," according to Bloomberg Businessweek.
The type of post-COVID entrepreneurship is also debatable. During the pre-COVID era, it is true that the notion of entrepreneurship became romanticized. However, the hype tended to focus on a small number of Silicon Valley-type "winner-takes-all" ventures that rapidly became "unicorns" (private firms worth more than $1 billion). As a result, pre-COVID entrepreneurship-at least the type frequently written up by the media-was less diverse and less inclusive. In 2019, less than 3% venture capital (VC) investment went to women-led ventures. Just 1% of VC-backed founders were Black and 1.8% were Latino. Black women-led ventures attracted a grand total of 0.06% of all VC funding in the United States. Geographically, tremendous inequalities existed. In 2019, Silicon Valley grabbed almost half of VC funding. Even Texas, which attracted the country's largest inflow of people (such as Elon Musk) and companies (such as Toyota) due to significant economic opportunities, received only a smattering of VC funds.
Ranging from CNN host Fareed Zakaria to Kauffman Foundation president Wendy Guillies, gurus widely predict that such inequalities in entrepreneurial funding-and ultimately in entrepreneurial and economic opportunities-will get worse. There is some fear that tech titans may capture more markets and continue to grow from strength to strength. But the majority of entrepreneurial firms are left to fend for themselves. While the economy needs world-beating giants, it also needs diverse SMEs of all stripes run by minorities, immigrants, women, and older adults that energize our neighborhoods. There is a great deal of talk about the "ecosystem" for start-ups. But in an ecosystem where the strongest trees may grow into the tallest giants, such formidable competitors can deprive saplings of nutrients and sunlight, ultimately endangering the forest.
Overall, we are at a point of inflection. An ugly pandemic has created a once-in-a-century chance to loosen old structures and recharge the global economy. As a result, a great reset for entrepreneurship is needed. Will this opportunity be embraced or squandered?
Case Discussion Question:
From a resource-based view, what are the resources and capabilities that post-COVID entrepreneurs need in order to succeed?