Posted: June 26, 2009
The coming wave of entrepreneurship
Businesses will be launched by former auto workers, mortgage processors and othersBy Thomas Frey and Raymond Alvarez
Traditionally it could be predicted that for every 100 people who join the ranks of the jobless, seven will attempt to start a business. Some find business niches, others invent and still others find a better way to do something markets are craving. Ingenuity and daring often are the catalyst for setting business and commerce in motion -- though nothing overcomes inertia like the lure of cash.
The slow trickle of business starts is about to swell into a tsunami. Legions of former auto workers, mortgage processors, school teachers and others will be forced to do something unusual and that's hire themselves.
Overnight, an undetermined number, but assuredly greater than 7 percent, are about to become entrepreneurs and perhaps herald a new era of great wealth building. The problem: This is a nation ill-prepared to serve these burgeoning numbers. With a dearth of funding options available to startup entrepreneurs, many of the startup ideas won't make it past the cocktail napkin stage.
Don't hit the panic button just yet, though. A host of new trends are coming that offer aspiring entrepreneurs new opportunities.
Trend No. 1: It is anticipated that the jobless rate will rise to over 10 percent later this year and remain there for many months to come. Unemployment among blacks, Hispanics and other minority groups will approach and possibly exceed 20 percent.
Trend No. 2: Both personal and corporate risk taking has ebbed to a new low. The recent surge in bankruptcies and foreclosures has sent many scurrying for cover. The economy's clinging-to-life-support pallor has most of us more than a bit worried. Concern naturally has shifted to survival, with little time or tolerance to test new business models. So, creation of spin-offs and subsidiary companies are likely to be few. Investment capital is expected to be sparse.
Trend No. 3: Creation dynamic: The cost of employment is rising, placing more pressure on employees and employers. Additional taxes, and other overhead burdens that have been passed on to the employer, will translate into less hiring.
Complicating the hiring outlook further, each new employee will undergo far greater scrutiny than ever before. It then falls on employees to respond, with greater pressure to perform -- a situation that will lead to more disenchantment and fuel more business startups.
Trend No. 4: Mis-channeled funds: The government is funding jobs, not the job creators. Stimulus money spent on job-generating contracts will not bring the enduring returns that business growth will produce. Money channeled into startups will provide exactly the kind of economic stimulus sought by government. Success in the startup community has a rapid multiplying effect. With the accompanying effects of innovation, countless new jobs could be created.
Trend No. 5: Problem: Currently no effective systems exist for government to channel money to the startup community. The SBA is ineffective and even dysfunctional when working with startups. Without access to seed funding, the only startups likely to gain traction are low-cost and zero-cost enterprises. These mostly home-based operations will factor into the recovery, but will be skewed heavily in the direction of online businesses. Steady lasting growth will have to come from better funded micro companies.
Trend No. 6: Reason for optimism: The online digital world is an engine that requires little startup capital. Profitability for new business is often within reach of even those with little or no money. Little wonder more and more talent is shifting away from physical products toward the online marketplace.
Trend No. 7: One-person businesses are springing to life with surprising regularity. The Empire of One business model, which seems to be under the radar of colleges and business schools, is catching fire because of innovations that have leveled the playing field, allowing individuals to compete with much larger companies.
Trend No. 8: The Business Colony Solution: enterprise zones and incubators for individuals. Call them hatcheries, business suites or anything else as long as support mechanisms are put in place to improve success rates of one-person and small businesses. New entrepreneurs may chafe and even balk at the stack of paperwork. Navigating a maze of bureaucratic red tape should be made easier. Enticement should be used to ignite business formation around industries expected to have unusual growth. Cities will take the lead in experimenting and supporting business colonies. Regardless of government involvement, colonies are bound to form around specific industry themes such as photonics, nanotechnology, online gaming, genealogy and many more less exotic businesses. For this natural process to accelerate, though, it will take startup money.
Thomas Frey is the executive director and senior futurist at the DaVinci Institute and currently Google’s top-rated futurist speaker. At the Institute, he has developed original research studies, enabling him to speak on unusual topics, translating trends into unique opportunities.Before launching the DaVinci Institute, Tom spent 15 years at IBM as an engineer and designer where he received over 270 awards, more than any other IBM engineer.
Raymond Alvarez is a journalist, microblogger and emerging expert in social media. He is president and owner of Nextwave Communications, which provides cutting edge communication services to the Colorado business community. The Boulder County firm offers research, writing, strategic planning and analysis.