Start Us Up Start Us Up logo

Pandemic Led to Entrepreneurs Starting More Businesses

One of the many effects we’ve experienced from the COVID-19 pandemic is a dramatic rise in the number of new entrepreneurs in a given month.

Indeed, the rate of new U.S. entrepreneurs was higher in 2020 than any other year since data collection began in 1996, according to the Kauffman Foundation’s National Report on Early-Stage Entrepreneurship.

The reason for that rise, however, was likely not a sudden upturn in entrepreneurial spirit across the country. Rather, the increase was more likely due to a spike in long-term unemployment, as indicated by data from Pew Research Center.

In other words, more people lost their jobs, so more people started new businesses out of necessity rather than choice.

Using what the Kauffman Foundation calls “opportunity share” — i.e., the rate of entrepreneurs who start new businesses by choice rather than necessity — the research indicated a 17.1 percentage point decrease in the share of new business willingly begun between 2019 and 2020. This was larger than the 6.9 percentage point drop during the Great Recession between 2008 and 2009.

Other 2020 data indicated:

  • Opportunity share among African Americans was 75.7%, down from 82.0% in 2019. Among Asian entrepreneurs, the figure dropped to 82.7% from 91.3% in 2019.
  • The highest rate of new entrepreneurs was among Latinos (0.52%),  compared to African Americans (0.38%), whites (0.36%), and Asians (0.35%).
  • The rate of new entrepreneurs for women was .30% and .48% for men, up from .23% and .38% in 2019, respectively.
  • The rate of new entrepreneurs was 0.59% for immigrants — notably higher than the  0.34% of native-born Americans, though consistent with past years in which immigrants were nearly twice as likely to be entrepreneurs as native-born Americans.
  • The startup survival rate was 78.1%, down from 79.4% in 2019. That was the first drop in survival rate since the Great Recession.

These figures illustrate the dual pandemics that have rocked American economy — the COVID-19 pandemic has obviously had a dramatic impact, as has the systemic racism that has prevented entrepreneurs of color from enjoying the same opportunities as white Americans. The COVID-19 pandemic has exacerbated this trend, consolidating wealth and limiting opportunities for meaningful employment and upward mobility. This inequity illustrates the systemic barriers that separate those with privilege from those with less access to opportunities.

So we can look at this two ways: we can look at the numbers and bemoan the issues that have stricken us, or we can work together to improve the four pillars spelled out in America’s New Business Plan: access to opportunity, access to funding, access to knowledge, and access to support. We can collectively support entrepreneurs across the country to ensure a level playing field for all.

As the plan says, “to build an economy that works for everyone and enables more entrepreneurship, policies must break down historic and systemic barriers so that all Americans, regardless of race, gender, and geography, can achieve economic stability, mobility, and prosperity.”

See all stories