Much of the COVID-19 pandemic’s impact on the local and state economies has been focused on the overall decline of available workers, particularly those in minimum- to low-wage jobs.
Rather than return to the jobs as those economies continue their uneven recovery, a record number of North Carolinians have chosen to become their own boss in what N.C. Secretary of State Elaine Marshall calls a “new era of entrepreneurship.”
According to a recent Secretary of State report, more than 185,000 business-creation filings are projected for 2021 — with 129,000 already submitted as of Sept. 13.
To put that total into perspective, there was an annual record of 127,000 business creation filings for all of 2020.
A search of the Secretary of State’s business registration site listed 6,901 filings in Forsyth County from mid-March 2020 through Sept. 20, as well as 27,586 in the 14-county Triad and Northwest N.C. region.
Marshall said the filings trend represents “unprecedented growth since last summer.”
Researchers in the Secretary of State’s office determined that “the vast majority” of startup businesses comes from individuals “in search of new opportunities, and not as a result of a job loss.”
“The pandemic has been a difficult time for anyone to start a new business,” said Allan Younger, director of the Small Business Center at Forsyth Technical Community College.
“We continue to offer educational events and business mentoring to others seeking to improve their business success.”
Michael Walden, an economics professor at N.C. State University, said the 2021 pace for business-creation filings likely isn’t sustainable past this year.
“It is typical for business start-ups to rise after recessions,” Walden said.
“Since COVID-19 set a record for depth of a recession — although only for one quarter — it makes sense that this entrepreneurial activity has been strong during the recovery from the recession.”
Not as optimistic about the startup business trend is Keith Debbage, a joint professor of geography and sustainable tourism and hospitality at UNCG.
“The massive jump in new business startups certainly contradicts the long-term trend of declining levels of entrepreneurship in the U.S.,” Debbage said.
“It remains unclear to what extent the growth in new business creations is a response to opportunity, or the result of necessity, such as layoffs.
“During the pandemic, it is possible that home-grown entrepreneurship may be the only viable and safe source of economic growth for many folks — triggered not by a nurturing entrepreneurial ecosystem, but by a strategy of last resort,” Debbage said.
The surge in business creation filings “definitely counts as a silver lining,” said Mitch Kokai, senior policy analyst with Libertarian think tank John Locke Foundation.
“It’s a clichè, but this is a clear example of turning lemons into lemonade.”
Kokai said that “Americans in general, and North Carolinians in particular, tend to have an entrepreneurial spirit. It drives them toward new ways of living their lives and serving their fellow man, woman and child.”
“Now, with the pandemic as the catalyst and technology as a helpful tool, more and more people are rethinking the ways they want to live their lives.”
Kokai said the pandemic “shut some doors” on employment opportunities, “forcing people to look for something new.”
“In other cases, changing life patterns linked to the pandemic revealed new business opportunities.
“Driving to the office and sitting behind a desk doesn’t have the same appeal today as it did a few short years ago.”
An uptick in business creation filings during an economic downturn or a major employer shakeup is not unusual.
For example, when First Union Corp. bought Wachovia Corp. in 2001, about 1,300 local job positions either were transferred to Charlotte or eliminated over the next 24 months.
For some former Wachovians, they left the area in pursuit of similar skilled and paying employment.
Some small businesses, particularly community banks, gained access to former Wachovia employees who chose to stay, either to continue raising their family or out of preference for the lifestyle here.
Others formed boutique small businesses or went in a new direction altogether.
This time around, the availability of federal pandemic relief compensation gave the unemployed or furloughed more time to plot their next move, including a business startup.
There’s also been a ramp-up in entrepreneurial assistance from local groups, such as Winston Starts, Greater Winston-Salem Inc. and Innovation Quarter.
One effort that recently debuted is the Winston-Salem Partners Roundtable Fund.
The goal “is to provide meaningful access to capital with the goal of helping early-stage companies scale.”
Fund officials are looking for companies ready to proceed with seed-level investments that typically will range from $100,000 and $300,000, “but have the potential to be larger.”
Companies must be based in or committed to relocating to Winston-Salem and/or Forsyth County to be eligible.
Fund officials said the initiative “is industry agnostic, but preference will be given to startups in industries in which Winston-Salem has expertise.”
This includes health care, information technology, data analytics, apparel, education, virtual reality, automotive technology and unmanned aviation.
Selected companies will have access to the management expertise of the fund’s more than 60 accredited investors.
During an investment round, the fund may require participants to allow a representative to sit on its board of directors or occupy a formal observer’s role.
“Some of the most innovative new ideas in many industries are being developed right here, and our entrepreneurial network fosters the growth of those ideas into thriving companies,” says Steve Lineberger, who is serving as a partner for the fund.
Lineberger stepped down in May 2020 after three years as president of Winston Starts.
Never too late
In March, Greater Winston-Salem launched another in a long line of ambitious economic initiatives, this one titled “Where growth starts.”
Mark Owens, president and chief executive of Greater Winston-Salem, said during the unveiling of the initiative that “we are a community built by entrepreneurs, innovators, educators and artists. We’re constantly pushing forward, creating a community that’s resilient and thriving.”
The latest set of goals has 2030 as the finish line.
The surge in business startup interest locally comes from “people evaluating many aspects of their life,” Owens said recently. “Some are choosing to take that leap to establish their own business.”
“North Carolina has the resources to sustain new-business growth, but this particular growth trend, if it is associated with pandemic considerations, may eventually plateau.”
Owens said Winston-Salem and the Triad should benefit from its reputation as an inviting area to start and grow a business.
“The support for new entrepreneurs is very strong,” Owens said. “The low cost of doing business makes it more feasible for startups to locate here.
“On top of that, they can utilize the advantages of the numerous resources in the entrepreneurial ecosystem to extend their runway and find sustainable success.”