The current upheaval of COVID-19 on the economy has pushed young entrepreneurs to pivot. Our recent research on minority-owned startups and small businesses in Michigan alone has pointed to some of the challenges that these young entrepreneurs face. However, it’s crucial to put this current economy into perspective by reflecting on the trends that have shaped different periods of innovation and entrepreneurship over the past few decades.
Baby Boomers and the Boon of Big Business
In the aftermath of World War II, the Baby Boomer generation (individuals born between 1946 and 1965) found themselves coming of age in one of the largest stretches of economic growth in the United States. This growth was largely driven by pent-up consumer demand.
Capitalizing on the increased consumption, many young adults launched retail business of their own: Walmart, Kohls, and Menards are just a few examples of namesake companies that were founded by young entrepreneurs that then became economic titans. Additionally, the Baby Boomer generation is also credited with giving rise to the fast food industry. As leftover military rations were sold at supermarkets, more and more Americans began to demand convenience. From this demand for convenience spawned McDonald’s, Taco Bell, KFC, and many other well-loved brands we know today. The growth of these two industries helped solidify the United States’ position as a global economic leader[i].
Gen X and the Rise of Internet Entrepreneurship
The economic decline in late 1970s and 1980s ushered in high income taxes and a poor stock market, which were then worsened by inflation. However, this economic downturn didn’t dishearten Generation X (individuals born between 1966 and 1976). It inspired many individuals to turn away from corporate America. It was during this time that the entrepreneurial ecosystem flourished, and many disruptive innovations were introduced. Some, like FedEx and Southwest Airlines, innovated a new, efficiency-based approached to transportation. The vast majority of companies launched, however, centered around technology. In the early 1970s, the Internet became accessible by the public for the first time ever, and entrepreneurs seized the opportunity to launch new technology businesses. Microsoft and Apple were at the forefront of this wave, but they were accompanied by the creation of a number of niche companies like Genentech, a genetic research firm, and the SAS Institute, a software and data analysis entity.
It’s also important to note that this entrepreneurial success was mirrored in minority communities in ways it had not been previously. An increase in public-sector, affirmative-action programs created opportunities for minority-owned business owners to not only open new businesses, but also to diversify their business ventures. This led to exponential growth in minority-owned businesses between the 1960s and 1980s. Education and experience allowed minority-owned finance, insurance, and real estate businesses to increase by 185.7%; business services by 175%; and wholesale industries by 111.8%[ii]. Many of these improvements paved the way for Millennial founders of color such as Ryan Williams who leveraged his experience in the financial sector to develop Cadre, an online marketplace connecting real estate investors and operators and has subsequently raised $133 million from finance giants Andreessen Horowitz, Goldman Sachs Investment Partners and others.
Millennials and the Move to Social Media Entrepreneurship
Entrepreneurial momentum slowed as Millennials (individuals born between 1977 and 1994) reached young adulthood, and in the mid-1980s and early 1990s, it reached an all-time low. Much of this decline can be attributed to the high cost and risk associated with starting and operating a business; Millennials grappled with all-time high student loan debt, cost of healthcare, retirement and housing, amplified by the financial crisis in 2008[iii]. This encouraged young adults to turn to the ‘stability’ of full-time employment. The few who did pursue the entrepreneurial avenue struggled. As of 2018, the average annual revenue for Millennial entrepreneurs falls below Baby Boomers, Generation X, and the subsequent generation, Generation Z[iv].
Despite the barriers to success, many Millennial entrepreneurs were able to prosper. A few examples of companies founded by Millennials include Ipsy, Mashable, and Tumblr. A common theme amongst these, and other Millennial startups, is the rethinking of common activities to be more efficient. Ipsy, started by former YouTube personality Michelle Phan, reimagined shopping for makeup and skincare items into a subscription service. Mashable condensed tabloid and magazine content into one succinct platform. Tumblr gave bloggers a platform to not only continue to post content, but also find a community of bloggers similar to themselves. Community building through social media continues through other Millennial founded companies such as Facebook and Pinterest.
Gen Z and Social Advocacy Point to a New Era of Entrepreneurial Innovation
While many of the high barriers to entry that prevented working Millennials from starting a business still exist for Generation Z, there has undoubtedly been a shift in sentiment. Gen Z (individuals born between 1995 and 2012) continues to fight for change across the board, refusing to be victims of circumstance. In the face of a global pandemic, oncoming recession, and growing injustices against women, the Black community, LGBTQ+ community, Indigenous community, people of color, and other minorities, we see Generation Z leveraging the tools at their disposal to efficiently disperse information and organize action–in some cases better than large entities have been able to. Teenagers, like Greta Thunberg, climate change activist; Nupol Kiazolu, President of Black Lives Matter Greater New York; and Emma Gonzalez, co-founder of gun control advocacy group Never Again MSD; have all rallied thousands across the globe in support of their cause. These global initiatives, along with others, are driven by grassroots efforts and spearheaded by unpaid community leaders.
As these leaders move into the workplace, it would not be surprising to see a surge in entrepreneurial ventures. Successful entrepreneurship, especially in the face of the oncoming recession, demands resilience, the ability to think outside of the box, and the willingness to go up against big corporations. Much of Generation Z has grown up honing in these skills of digital marketing, communication, creativity, and fighting against a greater power. This makes them well equipped to not only enter the entrepreneurial ecosystem, but also to quite possibly change the way we do business altogether.
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EntryPoint is a nonprofit research institution that aims to promote entrepreneurship across the Midwest. The organization believes that the best research takes a holistic approach to data acquisition and analysis, and as such, seeks to build meaningful partnerships with corporations, community foundations, entrepreneurial support organizations, and other groups. Working in tandem with these partners, EntryPoint develops comprehensive research reports that deliver insights on strengths and challenges facing companies, communities, and the broader region. Research findings are used to design and implement effective programs to promote entrepreneurship by fostering an inclusive culture, expanding networks, and facilitating education and advocacy. EntryPoint is a registered 501(c)(3) organization. To learn more, visit www.entrypointmi.com.
[i] Kaarlgard, R. (2008, October 23). A New Wave of Entrepreneurs? Forbes. https://www.forbes.com/forbes/2008/1110/033.html#4054d2cb6356
[ii] Smelser, N. (2001). America Becoming: Chapter 9, Trends in Minority-Owned Businesses. https://www.nap.edu/read/9719/chapter/10
[iii] Prakash, P. (2020, January 31). 2019 Millennial Entrepreneurs and Money Report. Fundera. https://www.fundera.com/blog/2019-millennial-entrepreneurs-money-report#:~:text=You%20won’t%20find%20many,to%200.37%25%20of%20baby%20boomers
[iv] Prakash, P. (2020, January 31). 2019 Millennial Entrepreneurs and Money Report. Fundera. https://www.fundera.com/blog/2019-millennial-entrepreneurs-money-report#:~:text=You%20won’t%20find%20many,to%200.37%25%20of%20baby%20boomers