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Economic downturns destabilize even the strongest economic ecosystems. Ann Arbor’s twenty years of growth has been put to the test several times, and each time the city and surrounding region has proven to demonstrate a successful progression in building a thriving entrepreneurial community.
This year has proven to be a year defined by unexpected shocks to our social fabric, including the economy. Specifically, the COVID-19 pandemic has caused both businesses and consumers alike to radically shift their day-to-day operations. Largely, companies in the Ann Arbor entrepreneurial community felt at least somewhat prepared to face this unexpected shift in operations. The transition to working remotely was smooth overall. As a result, high-growth, high-tech companies in Washtenaw County have experienced less loss of revenue than other types of businesses and, in some cases, have experienced greater gains.
Startups Remain Strong and Small Businesses Are Resilient in the Ann Arbor Startup Community
As Dug Song, the co-founder and general manager of Duo Security at Cisco, notes, “For Michigan to grow entrepreneurially, we need to foster a culture focused on regional success. We must support a robust startup ecosystem not just in Ann Arbor and Detroit, but across the state as a whole.” EntryPoint’s Washtenaw County COVID-19 Business Impact Report surveyed 36 of the 55 high-growth, high-tech startup companies on the impact of the COVID-19 pandemic on their startups. Our report found that 78% of these startup companies have fewer than 25 employees (compared to 89% of all businesses in the county). Despite all the changes brought on by the pandemic, 28% of these companies are hiring. This hiring trend is on par with data pre-pandemic.
As a result of the pandemic, since March, most high-growth, high-tech startup companies in the Ann Arbor entrepreneurial community have proactively made budget reductions and shifted to working remotely. Nevertheless, EntryPoint’s research found that 94% of all high-growth, high-tech startup companies surveyed in Washtenaw County felt they were at least somewhat prepared to operate during shelter-in-place.
None of the participating startup companies in the Ann Arbor entrepreneurial community felt completely unprepared (compared to 37% of all businesses in the county). Only 28% of startups lost more than half of their revenue since February (compared to 61% of all businesses in the county), while 31% have seen their revenue stay the same or increase during the pandemic (compared to 7% of all businesses in the county).