At first glance, it might not seem like the best idea to start a new business during a global pandemic. For one thing, some estimates showed that nearly half of small businesses in the U.S. had to temporarily close because of COVID-19, and many owners struggled to get their businesses back on track. Additionally, unemployment soared, and uncertainty became the norm. Why would anyone want to become an entrepreneur under these conditions?
It turns out that millions of Americans do want to become entrepreneurs, despite all of this uncertainty. The U.S. Census Bureau records the number of Americans who apply for a new Employer Identification Number (EIN) each week. Applying for an EIN is a crucial step in forming a new business.
From the beginning of 2020 to the end of September, Americans were submitting applications for new EINs at an average rate of about 84,000 per week. That’s the fastest rate since 2007. For context, that number was about 67,000 in 2018 and 2019 and just under 50,000 during the Great Recession and the years following it.
What’s more, entrepreneurial activity soared from June to early September, with an average of 111,000 new business applications filed per week.
It’s important to note that many of these businesses will ultimately shutter. Many new businesses will flop because of a lack of funding, lack of customer demand, or a host of other reasons. However, the increase in entrepreneurial activity indicates that Americans have a lot of ideas and are itching to turn those ideas into new businesses, even amid a pandemic.
And that trend isn’t all that new. Great ideas and successful businesses have been known to arise during tough times. For example, General Motors, HP, Trader Joe’s, and Hyatt are just a few examples of successful companies that were born during various recessions during the 20th century. And it’s hard to forget Uber, Airbnb, Square, Venmo, and a whole slate of other companies that were formed during the Great Recession.
We don’t yet know what the next Venmo or Uber-like company of the COVID-19 pandemic will be. However, the team at LegalZoom explored these COVID-preneurship trends more fully, attempting to understand why there’s been so much interest in new businesses.
For many, starting a business was likely a necessity, as the unemployment rate surpassed 14% at its peak during the pandemic. Others were likely motivated by having more free time at home and more of an opportunity to develop an idea they’d had for a long time.
Still others were likely propelled forward by more favorable financial conditions for businesses (for example, lower costs with the shift to online and remote operations.) Check out the infographic below for a closer look.