Previous recessions have shown this can prove a fertile time for starting a business. Airbnb and Uber were founded during the 2008/09 financial crisis, for example and if you go back even further in time, FedEx and Microsoft were born either side of 1973/75 oil crisis. At times of stress and struggle, people are forced think and work even harder, which can lead to higher rates of innovation.
While this is by no means an easy time for business, the Covid-19 crisis can lead to a resurgence of entrepreneurship. The idea that crisis heralds opportunity has been repeated many times before and it can be the case today.
The UK economy is going through a challenging time – forecast to contract 11% in 2020, which would be the worst in a century. As a venture capital entrepreneur, with a stake in more than 40 businesses in a range of sectors, which we helped with early-stage investment, I know we must remain positive. So why am I still bullish about entrepreneurship, despite the dismal economic climate?
First, the UK has a great tradition of small business and entrepreneurship. The French statesman and military leader Napoleon described us as a “nation of shopkeepers” and, while he meant it as an insult, I take it as a compliment.
We often forget that most of the economy is comprised of small businesses and not the large corporates we hear about constantly on the news. There are 5.9 million SMEs in the UK – businesses with fewer than 50 employees – accounting for 60% of all employment and 50% of turnover of the entire private sector.
People are constantly creating new businesses. Record numbers of companies have been formed each year in recent times – some will flourish, while others will fail, but this is a natural part of the economic cycle. We have to become more comfortable with failure – one of the reasons the US has such a dynamic entrepreneurial culture.
Flourishing through innovation
Second, from our portfolio of companies, we have noticed businesses that have been able to innovate in the last few months can flourish. A profitable, well-run business – whether large or small – is still viable. After all, consumers still need to eat, wear clothes, have an education and look after their health.
To offer a couple of examples, Thriva provides at-home blood testing kits, enabling people to track their health and take preventative action themselves. Another business that is eyeing growth at this time is teaching platform Kinteract, which assesses pupils’ progress in real time and provides a digital learning record for each of them.
While businesses in certain sectors have had to mothball, the best ones have used it as an opportunity to plan their post-pandemic strategy. Furthermore, some of our businesses in the hospitality or tourism sectors, which have been particularly adversely affected by lockdown, have pivoted with imagination.
Sourced Market, for example, had three food and retail shops in prime central London locations, which have been closed or quieter than usual over recent months. It has instead opened at a premium service station off the M1 near Leeds, in a location that promises to have a much higher footfall at this time.
High levels of resilience
Third, businesses with strong leadership should be able to navigate through the crisis. Entrepreneurs tend to be problem-solvers with high levels of resilience and a positive attitude. We always say we back people over product – and this adage is as relevant now as ever.
Finally, my experience in business fills me with hope about the enterprising instincts of young people. In the bygone era, successful entrepreneurs had often dropped out of school to start their business. Now, we are seeing a trend of young people starting small businesses while still at school or in formal tertiary education.
Many universities have actively encouraged this, forming hubs to incubate and support start-ups. Not everyone can be an entrepreneur – it requires tenacity, sacrifice and an eye for opportunity – but those who wish to should give it a go.
Despite the difficulty, the UK remains a powerhouse of entrepreneurship. The government recognises that small businesses are the lifeblood of the economy, and VCT and EIS managers are key to creating and nurturing this start-up culture.
A positive attitude is key – this country has a bad habit of self-prophesying failure. If we can take on what the prime minister calls the “doubters, doomsters and gloomsters”, however, when we look back at the current era, we may actually find the Covid crisis sparked a new wave of entrepreneurship in the UK.
Andrew Wolfson is CEO of Pembroke
