Despite the pandemic, North Carolinians are starting new businesses at a record paceDate Published:
It sometimes feels like there are record levels of uncertainty in the world at the moment.
A pandemic has disrupted nearly every facet of daily life. There is civil unrest in the streets. And a contentious election is on the horizon.
But for thousands of people, it is also a time for opportunity.
The number of startups being formed in North Carolina, as well as across the country, is surging, at least according to one measurement the government keeps.
The number of “high-propensity business” applications in the U.S. — a term the Census Bureau uses to track businesses that are most likely to become employers — recently reached its highest recorded level in a quarter.
North Carolina, too, had a record 13,938 high-propensity business applications in the third quarter of 2020.
The number, perhaps, shouldn’t be that surprising, said David T. Robinson, a professor of finance at Duke University’s Fuqua School of Business.
While the pandemic has brought a host of problems for businesses, many people find potential opportunities in the midst of trouble. Perhaps some felt they could take on the risk of a new business thanks to a stimulus check or increased unemployment benefits.
“Entrepreneurs are the economic agents in our economy that take risk to try novel solutions to existing problems,” Robinson said in an interview. “We have a whole slew of new problems we face. This (surge in applications) is a reflection of a natural entrepreneurial reaction.”
That is not to say that entrepreneurs are about to save the economy, Robinson said. There are many hurdles remaining, but it does show there are some signs of resiliency.
“I don’t want to sound pollyannaish,” he said. “We are coming down the pike of a second wave (of coronavirus cases) and this next wave could be much worse.”
TAKING A LEAP
It was August when Zainab Baloch, a former Raleigh mayoral candidate and activist, decided to quit her job to focus full-time on a startup she had been thinking about for years.
She and a team of two others are creating an app called Young Americans Protest that organizes young people and teaches them how to engage in politics.
Baloch has been a constant presence at many of the protests in Raleigh this year in response to the death of George Floyd at the hands of police in Minnesota. The app, in many ways, is a direct response to the need young people across the country feel to engage in politics.
That need led her to leave her dream job working at a financial technology startup.
“My purpose in life is to serve others to make a better world and to create a better community. And right now, the way I’m serving is this app,” Baloch said over Zoom. “And I think that the timing couldn’t be as right … because, at this point, everyone’s kind of getting crushed. And it takes entrepreneurs and people who are ready for a new world to step up and invest more time.”
Jeff Fisher, the chief executive officer of Unique Places LLC, said people look at him like he’s crazy when he tells them he just opened a new restaurant.
In September, he officially opened the doors to the Honeysuckle at Lakewood in Durham. The restaurant and bar is an extension of a coffee and tea house he owns in Chapel Hill, though the one in Durham involves different partners and is more focused on food.
“People were searching for ways to not say you are stupid or crazy,” Fisher said in a phone interview. “They would say, ‘That is bold.’ It was never, ‘That is a brilliant strategy.’”
But so far it has been working out for the new restaurant.
That’s in part because the space Fisher bought for the restaurant, the former County Fare bar in Durham’s Lakewood neighborhood, has lots of outdoor space, a feature that is worth a fortune in these days of social distancing.
And because it is a brand new restaurant, Fisher said, they were able to spend most of the summer designing it with safety protocols in mind. If it hadn’t been an outdoor-oriented location, he added, starting the restaurant may have been too daunting.
“People are so hungry to be outside,” he said. But “who knows what is going to happen next month?”
A WORD OF CAUTION
Ted Zoller, a professor of entrepreneurship at UNC’s Kenan-Flagler School of Business, cautioned about reading too much into the surging business application numbers.
A number of factors could be at play.
He said the government’s data could be picking up some noise from people registering businesses to assume loans under the Paycheck Protection Program, which provided hundreds of thousands of loans to small businesses across the country.
Other corporate entities might be forming to take on assets from a growing number of bankruptcies.
And even more, with so many companies laying off employees, he said, there could be a significant increase in the number of people turning to contracting. Especially those who were forced to take early retirements, Zoller added.
“People who have liquidity and are still young enough to work, they form entities to continue an income stream,” he said. “I personally know about eight people that have just gotten buyouts and were long-term employees of big corporations. They are still in their 50s. They still have miles on their odometer.”
NOT GOING BACK TO THE WAY THINGS WERE
But, yes, there are those that are forming startups to take advantage of opportunities created by COVID-19, Zoller said.
“The person who has the gumption to get going now, this is when they come out of the woodwork,” he said. “They are looking to solve the problem and get control of the situation for themselves and create economic certainty.”
E-commerce is one area that is particularly thriving, Zoller added.
Shaerie Mead knows that if her new fashion company has any chance to succeed, she will have to nail down a strong e-commerce presence.
Mead, a single mother, moved from Los Angeles to Hillsborough in February to be closer to family and a support system.
But when the lockdown came, and no jobs were readily available, she decided she would launch her own fashion company, Iona Clothing.
Without the pandemic, she doesn’t think she would have been able to find the time to start the company. She was even able to enroll in the American Underground’s Landing Spot program, an incubator for people making career pivots during the downturn.
“With a busy kid in school and trying to work to support myself, there is no way there would’ve been time for this,” she said. “Like sitting and thinking (about a business) — that doesn’t just usually happen.”
Between March and July, Mead was able to put together a fleet of designs. She is now sending those designs out to be turned into physical products.
She knows she is not guaranteed success. There is still much to be figured out, as it pertains to getting her clothing in front of potential buyers in a COVID-19 world.
“Retail is not going to return very quickly to what it used to be,” she said. “…The entire way we organize business is going to have to be re-examined.”
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate