Business startups are booming – offsetting a long drought for economy

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Here in Waltham, Massachusetts, a Boston suburb known for its eateries, new shops are popping up – a small piece of a national entrepreneurial boom that’s unprecedented in this century. There’s the Pakistani kebab restaurant that opened a month and a half ago on Main Street, the multiethnic bakery Indulgenza on trendy Moody Street, and a Haitian-run grocery next door to a Central American bakery on less trendy Prospect Street.

In 2020, American entrepreneurs applied to start a record number of new businesses, almost a quarter more than a year earlier. Economists say the boom is surprising because it happened during the economic turmoil of the pandemic, which heightened risk, but it’s also the logical outcome of ongoing shifts in the economy.

“It’s people being resourceful when they see a change,” says Donna Kelley, an entrepreneurship expert at Babson College. “There are so many opportunities that are opening up.” The boom goes a long way to compensate for the decline in entrepreneurship during and after the Great Recession.

Why We Wrote This

Open a physical storefront during a pandemic? As counterintuitive as it sounds, entrepreneurial people are doing exactly that. Necessity is one mother of all this invention, but another is creative response to a changing economy.

Waltham, Mass.

Standing behind a neat counter filled with pies, cakes, and napoleons, Isabel Pochesci is not afraid to think big. 

“I’d like to have 10 more Indulgenzas,” she says, after opening her first pastry shop, Indulgenza, here in suburban Boston two months ago. “For a pandemic, we are doing good. … I’m not scared.”

“For me it was scary,” says her daughter, Paula De La Torre, the store manager who serves the trickle of customers who wander in for a midafternoon snack. “But I trust her,” she says of her mother.

Why We Wrote This

Open a physical storefront during a pandemic? As counterintuitive as it sounds, entrepreneurial people are doing exactly that. Necessity is one mother of all this invention, but another is creative response to a changing economy.

A few blocks away on Main Street, Mahboob Ali Khan is waiting for the dinner takeout orders to come rolling in. He opened Peshawari Kebabs here in Waltham a month and a half ago. “It’s taking a big risk because the people believe it’s still very risky” to eat out, he says. But “so far so good. … We just see the people’s demand. Most of the [Pakistani] restaurants were closed” because of the pandemic.

Here in Waltham, a Boston suburb known for its eateries, these new startups represent a small piece of a national entrepreneurial boom that’s unprecedented in this century. In 2020, American entrepreneurs applied to start a record number of new businesses: almost 4.5 million, nearly a quarter more applications than a year earlier, according to census figures. The boom goes a long way to compensate for the decline in entrepreneurship during and after the Great Recession. And the fact that it happened during the economic turmoil of the pandemic makes it even more remarkable.

Melanie Stetson Freeman/Staff

Co-owner Mahboob Ali Khan poses in his new restaurant, Peshawri Kebabs, in Waltham, Massachusetts, on March 12, 2021. They opened for business on Feb. 4.

“The numbers make me more optimistic about the recovery,” says John Haltiwanger, an economics professor at the University of Maryland at College Park. “It’s a very healthy sign that actual entrepreneurship is back to levels of the 2000s.”

In some ways, the boom is surprising. It came in the midst of a pandemic, which added risk and uncertainty, while most surges of entrepreneurship come after a recession. After declining last spring relative to 2019, typical for startups in the middle of a recession, business applications began to soar in July.

In other ways, however, the boom is the logical outcome of a difficult, game-changing environment. For example, a record high 3 in 10 entrepreneurs who started a business in 2020 did so not because they wanted to but because they had to, according to a Kauffman Foundation report. That’s a dramatic change from 2019, where only 1 in 10 startups stemmed from necessity. So many workers lost their jobs and couldn’t find new ones that they had to strike out on their own to try to bring in income.

SOURCE: U.S. Bureau of Labor Statistics Current Population Survey via Kauffman Indicators of Entrepreneurship

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Jacob Turcotte/Staff

Another factor: Employees suddenly having to work from home have more time on their hands to try freelancing. Unlike the Great Recession of 2008-09, banks weren’t squeezed and didn’t stop lending. And the value of homes rose, giving entrepreneurs a key asset to borrow against and fund their ventures.

“It’s much easier now to start a business and to find a buyer of your professional labor in a remote working world than it was in 2009,” says Kenan Fikri, director for research at the Economic Innovation Group, a bipartisan public policy organization in Washington. The current environment “allows people to take that risk with more confidence.”

“It’s people being resourceful” amid change

Many of these new startups are sole proprietorships and are likely to stay that way. While those are significant, the crucial ones for economic growth are companies that hire employees. Applications for businesses likely to hire are up 15.5% from 2019 and more than 20% higher than the average for the previous decade. The rise is taking place across the board – representing all kinds of industries, from home-based companies flying almost under the radar to firms aiming to make a big splash.

“It’s people being resourceful when they see a change,” says Donna Kelley, professor of entrepreneurship at Babson College in Wellesley, Massachusetts, and a member of the oversight board of the Global Entrepreneurship Monitor. “There are so many opportunities that are opening up. Entrepreneurs see these opportunities. Technology is enabling it. Market change is also enabling it.”

This past July, Adagio Therapeutics, a $50 million venture spun off from a New Hampshire biotech firm, started operations here in Waltham to develop antibodies to protect against coronaviruses. It began a phase one trial last month.

The retail sector is seeing the biggest jump in startups. Applications in 2020 ran more than 50% higher than a year earlier. The biggest growth came from retailers selling goods online or for direct delivery rather than in stores, perhaps not surprising given the changes that the pandemic has wrought. It’s these shifts that open up the possibilities for new businesses.

But retail shops are also opening. 

Rising diversity among business owners

At Liam’s Market on Prospect Street, Marie Julien is directing workers to reposition a shelf. As they clear away bottles of yellow mustard and brightly colored boxes of fufu flour, she talks about her entrepreneurial journey. She’s had three grocery stores – the last one on Waltham’s trendy Moody Street catering to Haitians, Africans, and Spanish speakers, but that closed. Now she is trying to make a go of it on Prospect Street, which offers a less trendy mix of gas stations, auto parts, a cafe, and plumbing supplies. 

“It’s hard,” she says. “But we survive.”

The pandemic has not been kind to working women. “Women have an inordinately large footprint in retail and service, which have been harder hit,” says Linda Edelman, chair of the management department at Bentley University in Waltham. And working mothers typically have had to shoulder more child care and education responsibilities than men. The number of female entrepreneurs jumped last year, according to the Kauffman Foundation, but not enough to overcome the long-standing gap with male entrepreneurs, whose numbers also jumped last year. 

Melanie Stetson Freeman/Staff

Erick Aroche and his wife, Marylin Morales, pose in their new shop, Kairo’s Cake and Bakery, with her mother, Blanca Castanaza, and their daughter, Jaylene, who both help with the baking, in Waltham, Massachusetts, on March 12, 2021.

Black entrepreneurship is a different story. After lagging other racial and ethnic groups for the past quarter century, the share of entrepreneurs within the African American community jumped last year to the level of white Americans, the Kauffman Foundation found. Latinos continued to outpace both of those groups, as well as Asians. 

Next to Liam’s Market, Erick Aroche and his wife, Marilyn Morales, have opened a small corner bakery serving tres leches cakes, concha bread, and other specialties for the neighborhood’s Central American population. They are first-time entrepreneurs, and he describes waiting for a message from God before opening the shop last September, before a surge in pandemic cases in Massachusetts. They named their business Kairo’s Cake & Bakery, after the ancient Greek word kairos, meaning the critical or opportune time.

“Everything is fine,” says Mr. Aroche, “because always God is with us.”

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