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Why Entrepreneurial Spirit Is Rising, Against All Odds (2024)

Illustration of a person sitting in a darkened retail shop working at a computer

“Call us crazy, but we’re starting a second business,” says a creative and mom of two.

Her whole life unfolds in a Zoom window: evidence of balancing work, a toddler, a newborn, a senior pet, and a family business. A life that did not have space for yet another thing. But here she is, struggling to find child care and contemplating her next startup. 

Data emerged at the end of 2020, a year that all but decimated Main Street in every town around the world: New business creation in the US was on the rise. And the trend continues into 2023, despite rising costs and continued disruption to supply chains. 

In past recessions, the number of new businesses created decreased. Yet, in the third quarter of 2020, amidst a pandemic that wreaked havoc on the global economy, new business formation in the US actually increased. In fact, it soared. In July 2020 alone, over 500,000 new businesses were created—nearly double the year prior. Since then, new business formations have remained higher than 400,000 every month.

Data visualization showing a surge in business applications in 2020
Data from the US Census shows a genuine boom in small business applications during 2020, particularly in the third and fourth quarter of the year.

Why is this time different? Several theories have circulated to explain why entrepreneurial spirit is peaking during a time that all but conspires to crush it. Perhaps resilient founders, forged by hardship, are pursuing opportunities brought about by a civilization that’s been pulled forward by nearly a decade. And the challenges of the past three years have strengthened them even more—Shopify president Harley Finkelstein has dubbed 2023 “the year of the entrepreneur.”

Against all reason, why did the pandemic inspire an awakening of entrepreneurial spirit? It’s simple—when we cheer for the underdogs, they can win.

Entrepreneurial spirit surges on

Entrepreneurship has never been more mainstream. Social feeds are awash with messages that prod onlookers to chase their dream. But these picturesque highlight reels belie an uncomfortable truth: for years, entrepreneurship has been on the decline. One unfortunate result of this has been massive conglomerates continuing to consolidate their immense power. In fact, it was these same giants that benefited the most from the recent crisis.

In stark contrast, the overall number of active businesses had tumbled—a trend that was accelerated at the onset of the pandemic. According to a US population survey, the period between February and April 2020 saw 3.3 million businesses close.

Illustration of a person staring up at a giant hand reaching into a store's roof
The largest companies reaped the benefits in the early days of pandemic while independent businesses scrambled to stay afloat.

When businesses did begin to reopen, as lockdown restrictions eased and government relief was distributed, the damage was already done. By July of that year, data showed that the number of permanent closures exceeded the number of temporary closures, and by September, the spread was even wider. Blue skies turned gray, and there were few silver linings to be found.

In the most vulnerable communities, the outlook felt especially grim. BIPOC (Black, Indigenous, and people of color) communities were hit hardest by the pandemic, intensifying the health care imbalance in the US. For BIPOC-run small businesses, government relief rollouts exposed the cracks in the financial system—the communities underserved by big banks were the last to receive their much-needed funds.

Tragically, reports have shown 41% of Black-owned businesses, 32% of Latino-owned businesses, and 26% of Asian-owned businesses were forced to close during the period of February to April 2020. Business owners that already bore the weight of injustice and financial bias now faced outsized hardship as the pandemic beset their communities. 

Latino-owned businesses faced great challenges due to less access to relief loans and a higher proportion of businesses in industries particularly affected by the pandemic.

Marlene Orozco, Lead Research Analyst at Stanford

Marlene Orozco has worked closely with the Latino entrepreneur community in her work as Lead Research Analyst at Stanford. Her research showed that by the end of March 2020, 86% of these business owners had reported negative effects caused by the pandemic. “Latino-owned businesses faced great challenges due to less access to relief loans and a higher proportion of businesses in industries particularly affected by the pandemic,” she says.

Surprisingly, Marlene also found that optimism for the future among members of the same group remained high. And they weren’t alone. While entrepreneurs struggled, entrepreneurial spirit thrived.

Successful entrepreneurs thrive on change

Despite the devastation caused by rolling lockdowns, an anomaly in the data tells another story. Not only did business applications in the US surge toward the end of 2020, the third quarter shattered records, exceeding the next highest quarter of the past decade by 48%.

This breaks a four-decade long trend, where periods of turmoil had seen applications drop. During the last major economic downturn, more than 100,000 fewer employer businesses were founded in 2009 than in 2007. However, we can’t ignore that past recessions also created opportunity for the disruptors. The next generation of companies all emerged from the ashes of the recession of 2008. Was the phenomenon a hint of what was to come?

The lion’s share of new business applications in 2020 were attributed to the retail sector. But what’s more telling is, within that industry, it was “non-store retail” (or ecommerce) stores that flourished. More consumers shifted to online shopping out of necessity, and tools to help businesses sell to these new customers rushed to market.

Data visualization showing business applications by sector


Data visualization showing weekly business applications by retail subsector
The rise in new business formations starting in 2020 is driven primarily by non-store retailers, or businesses selling goods online and/or directly to consumers.

An abrupt change in consumer habits had met a rapidly growing industry—and the opportunities that followed explain at least some of the recent enthusiasm for entrepreneurship. Online stores pivoted and sprung up anew to address the gaps caused by lockdowns and isolation. Think subscription basics, home fitness solutions, and balcony gardening kits. “People have reoriented what’s important to them,” says Dr. Elspeth Murray, director (Centre for Business Venturing) at Queen’s University in Ontario, Canada. “And there are lots of new business opportunities out there as we speak.”

There’s this explosion of new technology, creator tools, and democratization in entrepreneurship—you see change everywhere.

Satish Kanwar, VP of Product, Shopify

But other theories have emerged. Satish Kanwar, VP of product at Shopify, submits that trust plays an important role. “People had made a fulsome switch in their mind from trusting that everything they thought would always be there will continue to be there tomorrow,” he says. The status quo has been interrupted not just by the pandemic, but also by a slow generational erosion of trust in systems. From this, entrepreneurial spirit is sparked in those looking to take their futures into their own hands.

“There’s this explosion of new technology, creator tools, and democratization in entrepreneurship—you see change everywhere,” says Satish. The means to pursue entrepreneurship have finally caught up with the desire to do so.

Entrepreneurship’s new class

Illustration of a person sitting at a computer while hands thrust cash out of the screen
Opportunities created by changing consumer needs and the emergence of new technology inspired a new wave of entrepreneurial spirit.

Data provides us with an important bird’s-eye view of what is happening. But there are stories that sum totals can’t tell. Four founders share how they’re facing this moment with little more than grit and determination in their pockets. 

Gemille’s story: the power of community

“We never did question launching during the pandemic,” says Gemille Walker, co-founder of AfroPick. He and his two brothers launched their business early in the pandemic, selling artist-designed picks that, for them, are more than just tools to manage natural hair. “They’re symbols of the unity and strength in Black culture.” 

While the effects of the pandemic cut some of their plans short, it also challenged them to connect with their community through other means, bolstering their entrepreneurial spirit. In some ways, the pandemic years couldn’t have been a better time to launch. “With the civil rights movements of 2020, it was an appropriate time to push self-identity and unity within our community,” Gemille says. 

Michael and Rachel’s story: opportunity borne from uncertainty

Michael Sturba and Rachel Duguay did not launch their business in 2020—but that’s when they went all in. The couple worked in the theme park industry until their jobs were both furloughed due to the pandemic. MicroPuzzles was a side gig they had run from their apartment since 2018. The brand sold mostly to wholesale and custom clients, but even that business was drying up due to store closures.

The pandemic forced people to rethink what is important and where they spend their dollars. There’s been a resurgence in a desire to support small businesses.

Michael Sturba, co-founder, MicroPuzzles

“It was grim,” says Michael. “But we had the luxury of time to work on the website and product line. By the end of March, we had pivoted to an online retail strategy.” The product was a perfect remedy for isolation-induced boredom—and the partners saw their sales boom as a result. “The pandemic forced people to rethink what is important and where they spend their dollars,” Michael says. “There’s been a resurgence in a desire to support small businesses.”

In 2020, MicroPuzzles upgraded its digs, moving from an apartment to a dedicated warehouse and office space. “We won’t be returning to our former jobs,” says Michael.

Jasmine’s story: meeting changing needs 

Before spending two decades in marketing leadership roles for major fitness brands, Jasmine Maietta played and coached pro basketball. In some ways, the launch of her new business, round21, has her returning to her roots. Jasmine launched her table tennis brand in 2020, tapping into a game that she saw firsthand as “cultural glue” in locker rooms and bringing it to the masses. 

She found her audience in a world that was now craving at-home diversion and play. In the summer of 2020, Jasmine noticed basketball nets were being removed from playgrounds to discourage gatherings. “We wanted to give people ways to still find the joy in playing together, safely from home,” she says. “So, we accelerated our R&D and launched new round21 mini-hoops.”

Jasmine self-funded until January of that year, including a crowdfunding campaign that saw tremendous support from the brand’s growing community. “There seemed to be a greater-than-ever need for all of us to have self-expression and connection through play in our daily lives,” she says. In 2023, round21’s collection now includes footballs, basketballs, and NFT collections, partnering with the likes of the WNBA.

A road to recovery

Illustration of a person watering a community garden plot
Entrepreneurial spirit catches on as communities are rallying around independent businesses to secure the future of Main Street.

While the pandemic brought devastation, the social movements were a reckoning. In response, communities have mobilized, technology and tools have accelerated, remote work has connected us, and consumer habits have forever changed. While consumer spending took a hit in early 2020, it has increased by 22% as of February 2023.

Sales generated by Shopify brick-and-mortar store owners declined by 71% as the pandemic escalated between March 13 and April 24, 2020, compared to the six weeks prior. But those small businesses managed to recover 94% of lost sales by moving to online channels. And by that July, retail had rebounded in a big way, with many brick-and-mortar stores adopting curbside pickup and local delivery.

A fresh foundation is now settling. Call it the ground floor of the new economy. The effects of the pandemic have paved the way for a new generation of disruptors—a generation shaped by ingenuity and entrepreneurial spirit.

The future is independent

History suggests businesses opened during a recession have a lower rate of success versus the average business. Are we being overly optimistic? The numbers already tell us that this time is different. So, what does this path have in store?

Truthfully, no one can know for certain. But the status quo is behind us. 2020 created a tangible mindset shift among consumers—one that seems to be here to stay. New business formation remains at record highs into 2023. Support for small businesses is also on the upswing. “People are realizing, ’If I don’t do this, my neighborhood will be a wasteland,’” says Satish. “If I don’t seek out independent businesses, they will cease to exist.”

Smaller and more nimble businesses who have a diversified product or experience mix will continue to thrive and be able to mitigate external forces.

Jasmine Maietta, founder, round21

“This isn’t just the funky hipsters saying ‘shop local,’” says Shopify board member Toby Shannan. “The locavore movement that was on the fringe will become much more central to people.” This community-level entrepreneurial spirit on Main Street, and the access to technology and capital that did not exist before, unlock new opportunities for all breeds of entrepreneurs. But evolving with the change is critical for business survival. “Smaller and more nimble businesses who have a diversified product or experience mix will continue to thrive and be able to mitigate external forces,” says Jasmine. 

“I use ecommerce to access fresh sourdough bread down the street from me,” says Satish. That’s just one example, he says, of the digitization of local commerce in North America—a phenomenon already adopted by mobile-first countries like China. “We think it will stay,” he says. “It actually brings you closer to your community and adds a huge layer of convenience.” Businesses that were quick to clone local community spirit online and adopt tools to make it easier are already primed for what’s ahead.

Communities without businesses just aren’t communities. The closing down of Main Street is actually a catastrophe to a country.

Toby Shannan, Shopify board member

“In the last couple of hundred years there has been an antagonism, politically and economically, between governments and private sector organizations,” Toby says. What COVID has exposed, he suggests, is that there is a third seat at the table: civil society, otherwise known as communities.

In the past year, it’s become obvious that these three entities have a symbiotic relationship. Governments are realizing that “communities without businesses just aren’t communities,” says Toby. “The closing down of Main Street is actually a catastrophe to a country.” To prosper, he says, the three need to work together.

It’s clear that there is no single force driving, against all odds, this surge in entrepreneurial spirit. It began as necessity and passion, found a lifeline in opportunity, and gained strength in community support. Yes, the rising number of new businesses is worthy of our optimism. But it’s the real humans behind the data—the Jasmines and Michaels, the Rachels and Gemilles—who will harness this optimism to build the new frontier of entrepreneurship.

Additional contributions by Greg Ciotti
Data visualization by Datalands
Illustrations by Corey Brickley

Entrepreneurial spirit FAQ

What is entrepreneurial spirit?

Entrepreneurial spirit is a feeling or state of mind that compels people to start businesses. Successful founders often combine it with entrepreneurial skills to pursue creative solutions and new ideas to build their own businesses. Entrepreneurial spirit is a curiosity and desire to solve problems or build a better future. It is an intrinsic motivation common to many startup founders.

Why is entrepreneurial spirit important?

Entrepreneurial spirit is important because it motivates dreamers to pursue business ideas that solve world problems, create jobs, and support communities. Combined with hard work, entrepreneurial spirit can help budding entrepreneurs take calculated risks, overcome challenges, and persevere through failure.

How can an aspiring entrepreneur take advantage of the rise in entrepreneurial spirit?

With entrepreneurial spirit on the rise, there is a larger community of new entrepreneurs to draw from as you build your own business. As entrepreneurial spirit is also high among consumers looking to support small and local businesses, aspiring entrepreneurs can find products and services to cater to these eager audiences. Successful entrepreneurs will be those who can bring creative solutions and innovative ideas to the market.

What is an entrepreneurial mindset?

Entrepreneurial mindset refers to a frame of mind that includes a set of beliefs, rituals, and processes that helps an entrepreneur achieve outcomes and overcome challenges. This differs from entrepreneurial spirit because it is more than just a desire to build a business, but a calculated way of thinking that drives toward success. Someone with an entrepreneurial mindset is often one who seeks growth and continuous improvement, acquires new skills, and enjoys taking risks.