COVID-19 & Entrepreneurship: Who Started Businesses During the Pandemic?

October 2023 marked a turning point more than three and a half years after the onset of the COVID-19 pandemic: Americans were filing 59% more applications to start latest businesses than they were prior to the pandemic, a surge that defied expectations of recession, inflation, and supply chain disruptions.

The unexpected boom in entrepreneurship began in the early months of the pandemic, as traditional employment avenues constricted and individuals reassessed their career paths. While some businesses were forced to close or postpone operations, others adapted and innovated, finding new opportunities in a rapidly changing environment. According to a study published in Lett Spat Resour Sci, the pandemic triggered a significant increase in U.S. Entrepreneurial activities, measured by new business applications.

The surge wasn’t limited to a single sector. Entrepreneurs explored new business paradigms and innovation opportunities, often leveraging technology to reach customers and streamline operations. A report from the Journal of Small Business Strategy detailed how startups adapted their business processes—particularly in marketing and sales, logistics, and organizational support—to navigate the crisis. The study, based on in-depth interviews with co-founders of eighteen startups, found that flexibility, agility, and technological knowledge were key to survival.

The resilience of this entrepreneurial wave is particularly notable given the economic headwinds of 2023. Despite high inflation rates and rising interest rates, would-be entrepreneurs remained undeterred. This contrasts sharply with the period leading up to the pandemic, when startup rates and economic dynamism were at historically low levels, as noted in a recent Harvard Business Review analysis.

The COVID-19 recession, beginning in February 2020, saw a contraction of over 20 million jobs in the U.S. Nonfarm employment sector. While employment has since recovered, it remained more than 8 million jobs below pre-pandemic levels as of April 2021.

The long-term implications of this entrepreneurial surge remain to be seen. The ability of these new businesses to sustain growth and contribute to the broader economy will depend on a variety of factors, including access to capital, a skilled workforce, and a stable economic climate.