Small Business Strikes Back: The Numbers Behind The Next 1000 – Forbes
It’s a critical moment for small business USA—blindsided by Covid, it remains our most powerful and reliable economic engine and field of dreams.
n 2020, American venture capitalists invested an unprecedented $156 billion dollars into 12,254 startups, setting records in biotech, pharma and fintech. There were a record 454 initial offerings in the U.S. markets, generating over $167 billion.
But pull out a map, and you’ll see a country full of small-scale entrepreneurs who don’t have access to venture funding or Silicon Valley’s unicorn factory. According to the Kauffman Foundation, 89% of U.S. small businesses are either sole proprietorships or have less than 20 full-time employees.
The majority (83%) are funded from savings, credit cards, and loans from family or friends, with approximately $80,000 in startup capital for men and $54,000 for women. For people of color, the situation is even more extreme. Over 88% of Black-owned businesses, for instance, are one-person shops, according to the latest data from the U.S. Census Bureau.
Although these businesses are small, their importance to the U.S. economy is enormous. Before the pandemic, small businesses with less than 500 employees accounted for two-thirds of net new American jobs and generated 44% of U.S. GDP.
State-wide shutdowns and shelter-in-place mandates due to the pandemic have taken a disproportionate toll on these enterprises. “Small businesses and entrepreneurs drive America’s economy, but the environment they operate in is far from level,” says Philip Gaskin, vice president of entrepreneurship at the Kauffman Foundation. “The ongoing pandemic has further magnified the disproportionate impact on Black entrepreneurs, women entrepreneurs, and businesses in rural areas.”
To spotlight the army of entrepreneurs throughout the country, Forbes is debuting the Next 1000 initiative. These are the small-scale entrepreneurs with outsized ambitions.
This list is significant in three ways. First, the Next 1000 is not driven by wealth or the next “it” company or wunderkind. It’s concerned with the millions of aspirational and resilient small businesses that drive job creation and community well-being. To qualify, an enterprise (from full-time gig to side hustle) must have been in business for at least a year and have a maximum of $10 million in annual revenue or Series A funding.
Also, its bedrock is nominations—from you and champions of small business all over the country. Finally, instead of releasing the entire group at once, we are publishing in sections of 250 people, one “class” per quarter, the first of which appears here.
Our Resilient Small Businesses
According to a January 2021 U.S. Census Bureau survey of small businesses around the country, the national average of Covid-affected businesses by state stands at almost 31%, with cities like New York and San Francisco over 10% above the national state average above 41% and 42%, respectively. Industries that were the most affected include accommodation and food services (meaning hotels and restaurants and the like) at 65%, arts and entertainment (61%), and education services (53%). Other industries like healthcare (30%), retail (24%), and construction (18%) saw significant but lesser impact.
Businesses Affected By The Pandemic By State
The national average of affected businesses by state is 30.7%, but New York and California sit much higher, while Utah charts over 10% below.
Still, as this intrepid subset of the economy rebuilds, they are redefining what it means to run a business in today’s ever-changing environment. Despite significant roadblocks, several industries including home, auto and professional services opened new businesses at rates comparable to years past. Even restaurants, a sector that Covid has hit particularly hard, saw new openings down only 4%, in the fourth quarter year-over-year, according to Yelp’s Annual 2020 Economic Average report.
Overall, How Have Businesses Been Affected By The Pandemic?
Over half of businesses in the food service sector report being affected by Covid-19
“In spite of all the trials and tribulations that small businesses face, Covid-19 has actually provided an opportunity for them to level up due to their nimbleness, creating a competitive advantage against many larger companies struggling to be flexible,” says Melissa Bradley, managing partner at 1863 Ventures as well as an adjunct professor at Georgetown University’s McDonough School of Business. And while over 75% of small businesses needed to pivot their strategies last year, according to American Express’ latest Business Resilience Survey, 81% of business owners still believe the benefits of owning their own business outweigh the challenges. More than half have a positive outlook for the U.S. economy in 2021.
While the media and investor class continue to focus on mega-corporations and high-flying startups to lead the economy out of the Covid crisis, we see differently. Millions of scrappy small businesses have made smart and creative moves to adjust to the new normal and will not stay small for long. Each individual story in the Next 1000 is inspiring proof and holds powerful lessons for entrepreneurs across the country. Plus, why should venture-backed businesses have all the fun?
Nominations are still open. Send us your story today.