On Keeping Entrepreneurship Agile and Small Businesses Afloat Webinar Summary

COVID-19: On Keeping Entrepreneurship Agile and Small Businesses Afloat Webinar Summary 

On May 18, IEDC hosted a webinar titled, “COVID-19: On Keeping Entrepreneurship Agile and Small Businesses Afloat” where leaders in entrepreneurship and small businesses development spoke on the effect of COVID-19, and what can be done to help entrepreneurs and small businesses through the crisis, and beyond. Throughout the webinar, the speakers spoke about the importance of inclusion in entrepreneurship, the power of collaboration, the necessity of not going back to business as usual, and how to look ahead to recovery once this crisis ends. 

The session was moderated by Philip Gaskin, Vice President of Entrepreneurship at The Ewing Marion Kauffman Foundation. The speakers were Lyneir Richardson, Executive Director at the Center for Urban Entrepreneurship and Economic Development at Rutgers University, Ray Leach, Chief Executive Officer at JumpStart Inc. in Cleveland, OH, and Mark Lange, Executive Director of the Institute for Business and Entrepreneurship at the University of Wisconsin System. 

Moderator Phillip Gaskin kicked off the webinar by discussing the main goal of the Kauffman Foundation, which is to eliminate the systematic barriers to entrepreneurs and how they have translated this mission during COVID-19. 

Even prior to COVID, the United States was experiencing a 20 year entrepreneurial stagnation with the rate of new entrepreneurs almost flat. Now, in the United States, entrepreneurs and small businesses are at the frontlines to preserve our economy. Unfortunately, the inequalities that made it more difficult for women, minorities, and those in rural communities are just more pronounced during economic downturns. 

In the fall of 2019, the Kauffman Foundation announced Start Us Up, America’s New Business plan. This four-part, bipartisan, entrepreneurship policy plan was made to ensure that anyone with an idea has access to the opportunity, funding, knowledge, and support to turn it into a reality.

In response to COVID-19, the Kauffman Foundation is adding to Start Us Up and highlighting what business owners need to keep their doors open during COVID, what they are calling, Rebuilding Together. The Rebuilding Together plan is divided into two parts, crisis response (short term) and rebuild together (long term). 

As Phillip Gaskin explains, “Our goal shouldn’t be to just restore the economy, but to rebuild better by ensuring all Americans - especially entrepreneurs who have historically been marginalized by investors and lenders- can turn their ideas into businesses” 

Four Components of America’s New Business Plan

  • Funding: Equal Access to the Right Kind of Capital Everywhere
  • Opportunity: A Level Playing field and Less Red Tape
  • Knowledge: The Know-How to Start a Business
  • Support- The Ability for All to Take Risks

Each of these categories has policy points on how to deal with the crisis response and how to rebuild together. Learn more about the Kauffman Foundation’s plan here. 

Mark Lange spoke on the urgency of collaboration and how through this crisis, he has seen more organizations working together to assist entrepreneurs in a ‘just get it done mentality’. Lange notes a specific urgency in the connection between economic developers and those who provide technical assistance to entrepreneurs. Lange’s presentation includes information on how we move ahead from response, to recovery to back to growth again. 

Lange cautioned not to forget about the sole proprietors, as they account for 8%-10% of the jobs, but many jobs statistics do not include these non-employer businesses. Since they are typically not found on your main street, or any street, they are a hidden part of the economy. Due to this, there were not accounted for in the first phase of the CARES act, yet 75%-80% of all businesses in your community are categorized as non-employer. 

Lange highlighted some policy proposals as a road to recovery during these uncertain times. Lange noted that during typical times, these policy proposals, “would have never seen the light of day”, but uncertain times call for a fundamental change to the economic landscape forever. 

  • Create tactically deployed grant funding coupled with access to additional financing targeting sole proprietors, independent contractors and businesses with revenue less than 2 million;
  • Encourage legislation action to temporarily modify stat based refundable tax credit programs to consider job creation and job retention equally for eligibility purposes;
  • Suspend state economic development awards contract terms as it relates to job creation, payroll, and capital investment for businesses with existing award contracts during and 3 years after COVID -19 public health emergency ends.

Lange also outlined some best practices for recovery to resiliency to growth. 

  • Embrace change
  • Build capacity 
  • Upgrade talent
  • Treat e-commerce like R&D 
  • Do some good, if possible
  • Communicate constantly 
  • Build in resiliency preparation

Lynier Richardson spoke on the urgency of keeping minority businesses, specifically black-owned businesses surviving through COVID-19. Richardson explains that minority businesses are critical to healthy urban communities. 

Small minority owned businesses are in many cases the cornerstone of urban communities, and are too vital to fail. Minority businesses provide local jobs to those in the community and hire a larger percentage of black workers than non-minority businesses. They also create generational wealth in black communities where they are lacking the assets to create that wealth without. These businesses provide needed services, are the first impression when going to a commercial corridor, contribute to the local economy (for instance, many sponsor the local baseball team), and are a physical space for the community to congregate. 

Despite all of this, even during typical times, many minority businesses struggle and operate with very little cash on hand. During this economic crisis that COVID-19 has created, consumer-serving minority owned businesses are the most at risk to closing permanently. To stop this decline, Richardson suggests focusing on High-Impact Vital Enterprises (“HIVES”).  This includes securing emergency capital or cash reserves, developing businesses continuity plans, and connecting businesses to networks and support systems. 

Ray Leach spoke a little about the work JumpStart does in the state of Ohio to unlock the potential of diverse entrepreneurs to economically transform communities. He then used the rest of his time as a primer to what has been happening in the national venture capital industry over the past 10 weeks.

Jumpstart was started to focus on tech enterpeerus, and has transformed to focus on any and all entrepreneurs with a focus on diverse and ambitious entrepreneurs to then transform the entire community. To do this, they focus on capital, services, and partnering. Jumpstart spends about  ⅓ on tech investing through capital, ⅓  on direct services pro bono, and  ⅓ on grant making to workforce and economic development programs. For everything Jumpstart does, they put a large focus on diversity, inclusion, and equity with 40% of their budget going directly to black and latinx communities and entrepreneurs. 

Then Leach switched gears from Jumpstart to speak on the state of venture capital in the COVID-19 world, while summarizing a white paper the National Venture Capital Association (PDF)  put together a few weeks prior. Although venture capital has been growing and doing very well for the last 10 or so years, COVID-19 has brought the first massive disruption since 2008-09. 

Due to how VC works, now that the largest supporters of capital don’t have money themselves, the firms can’t raise the capital they have been used to bringing in, so less capital is going to the aspiring entrepreneurs. Venture capital may go through a downward similar to the dot com crash, if this lasts more than 6-9 months. If the economic downturn is less than that, venture capital will experience a downturn more like the 2009 recession, according to Leach.

A few statistics to show this downturn:

  • From March 11 - April 27, over 300 U.S. startups laid off over 35,000 employees
  • Another 50,000 layoffs is expected to occur this summer
  • Venture Capital dollars invested in April 2020 was down 47% compared to March 2020, and down 43% from April 2019
  • Uber, a technology company announced 7,500 furloughs (25% of their world workforce) and all innovation projects at Uber would be cancelled or postponed

A path forward from this crisis needs greater collaboration, more capital, and a deeper focus on equity. This means convening entrepreneurs, the general public, private, philanthropic and institutional partners, creating more funding options for entrepreneurs to use, and rebuilding the economy in a more inclusive and self sustaining way.  

At the end of the webinar, the speakers were asked about their thoughts on CDFI venture funds and what local governments can do to support entrepreneurship now. On CDFIs, speakers agreed that finding and hiring talent that has a track record of generated returns or who has played a role in increasing the economic prospects of a company is critical. If you can find that, then CDFIs can be a real opportunity especially while traditional venture capital is at a downturn.

On local governments, the speakers agreed on the importance of being champions and advocates for the underserved in your community. Specifically on the topic of capital, this can involve talking with the private sector and philanthropic community, and advocating for the entrepreneurs. To do this, the local government should have a deep understanding of what the direct benefits of these new companies are to their communities, not only tax dollars but savings, that comes from getting involved in supporting early stage companies.