04 May Up Next: The Greatest Era of Entrepreneurship and Small Business The World Has Ever Seen
Six game-changing forces are driving a new era of entrepreneurship and opportunity globally. How many of them are you tapping into?
There’s a raging debate about the future of small business. On one side is a mountain of data that indicates entrepreneurship is slowing. On the other side is the rising sentiment that it’s easier than ever to start a new business, whether you’re a 13-year-old sneaker-head or a 65-year-old consultant.
Part of the problem is that many of the metrics we rely on to plot the future of small business are simply misleading. For example, one stat used to justify the decline of small business is that the number of startups as a percentage of total businesses has fallen from 15% in 1978 to 8% in 2012. But that’s in large part because the total number of businesses has nearly doubled over the same period.
“Part of the problem is that many of the metrics we rely on to plot the future of small business are simply misleading.”
A bigger part of the problem is that we are simply looking in the wrong place. Sort of like the fellow who dropped his wallet on a dark sidewalk and then walked back two blocks to look for it under the last street lamp he passed because that’s where the light was!
In this same way we are looking at small business and entrepreneurship through the lens of the past, without factoring in six game-changers that are going spur what I believe will be the greatest era of innovation and entrepreneurship the world has ever seen.
Game Changer #1–Micro-Entrepreneurs
Starting a business is not for the faint of heart. But what if you could remove the risk from the vast majority of new business ventures?
That’s exactly what’s happening with what are being called micro-entrepreneurship marketplaces. Some of the earliest and most obvious of these are Ebay, Amazon, and Etsy. While getting exact numbers on the size of these marketplaces is difficult and requires a bit of speculation, it’s safe to assume that over 1,000,000 people use Ebay as their primary or secondary source of income, there are about the same number of shops on Etsy, and Amazon has over 2,000,000 marketplace sellers. Over 90% of all these sellers are sole proprietors who do not show up in any statistics about small businesses, employment, payroll, or entrepreneurship.
“…the potential represented by micro-entrepreneurism–already as high as 10% of the US workforce–is not tracked in any meaningful way.”
In addition there are nearly 100 other marketplaces in existence today where people earn all or part of their income. Some of the most popular are Amazon’s Mechanical Turk, Crowdflower, Innocentive, Elance, and oDesk, which collectively include about 10,000,000 participants.
And then you have the micro-entreprenuers who are involved in Uber, Lyft, Airbnb, Instacart, TaskRabbit, Homejoy, and others; they add another 1,000,000 to the ranks of micro-entrepreneurship.
And yet the potential represented by micro-entrepreneurism (which could already be as high as 15,000,000 people or about 10% of the US workforce) is not tracked in any meaningful way. They are not employees, nor are they running a business, at least not in the traditional sense.
So, what impact will this new breed of micro-entrepreneur have on the economy? Well, consider that franchising, one of the great game changers for small business over the course of the last century, today accounts for over $1 trillion in total sales and employs approximately 15% of the US workforce. My sense is that micro-entrepreneurs will far exceed that sort of scale and economic contribution in just the next five to ten years.
Game Changer #2–The Renaissance of Manufacturing
In our book, The Gen Z Effect, my co-author Dan Keldsen and I talk about how 3D printing is creating an entirely new model for hacking the high cost of manufacturing and creating a manufacturing renaissance for entrepreneurs. With 3D printing the time and cost of prototyping, testing, and market adoption drops dramatically, as does the cost of the final product. One of my favorite examples is Easton LaChappelle, a teen who used 3D printing to not only build prosthetic arms that can be sold for a few hundred dollars, as opposed to traditional prosthetics that can cost upwards of $50,000, but also made his 3D design and engineering plans available as open source! 3D printing opens up manufacturing to just about anyone who has access to the Internet. Easton is not only creating value for himself but he is also creating a platform for value creation that ends up being an entrepreneurship multiplier.
Game Changer #3–The Hidden Billions
A staggering 500,000 new businesses are started each month in the USA alone. While only 30 percent of those businesses have more than one employee and less than 20 percent will survive their first year, that still leaves just about three million new businesses each year that are bootstrapping without any outside funding. Not all are destined to become the next Google or Facebook, but if only one percent even come close, that’s still thirty thousand businesses that have a good idea and do not have access to outside capital–seven times as many as do get funding!
“within ten years the amount of money flowing through all crowdfunding platforms will at least equal that of all other funding sources.”
That’s an enormous amount of potential opportunity left on the table. Just to put it into perspective. Estimates from the National Venture Capital Association put the contribution of VC at about 10% of US GDP. While the math is fuzzy, we could claim that GDP would increase by as much as 70% if seven times as many businesses were able to get funding!
What will fuel these businesses is crowdfunding, through platforms such as Kickstarter, Indiegogo, Bolstr, and RockThePost which to date have raised over $3 billion for businesses that would otherwise have no access to capital.
Crowdfunding may still represent under 5% of total funding from VC and angels but it’s doubling year over year. I’d go so far as to project that within ten years the amount of money flowing through all crowdfunding platforms will at least equal that of all other funding sources.
Game Changer #4– The No-Cost Failure
The entire risk profile of an entrepreneurial startup is changing radically. In the Graduate classes I teach,my students have increasingly been voicing their expectations that they need to have started at least one if not several businesses. While they would all like to hit it big they are more concerned with the stigma of not having tried than with having tried and failed. In research we did for The Gen Z Effect we found that 50% of Gen Z (born after 1995) expect to start their own business.
“…50% of Gen Z expect to start their own business.”
The reality is that with the availability of micro-entrepreneur platforms, free or near-free services in the cloud, and crowdfunding options, the down side of starting a new business is approaching zero. Experimentation is all but free. All that you are investing is your time. Think about it. If I were to take you to a casino, sit you down at a roulette wheel and let you place your bet with free chips, which would pay off in real money if you won, would there be any reason not to place the bet? Yeah, now you’re getting it.
Game Changer #5–The Third Act Entrepreneur
It’s been said that boomers have been the most entrepreneurial generation. Yet, the vast majority have worked in a traditional organization and haven’t started their own business–not yet anyway. As Boomers become Zoomers (A moniker meant to describe their continued momentum past the 65 year mark–and one I personally love since I’m smack in the midst of that cohort!) many of them are struggling with the notion of retirement.
“…retirement is a construct of the past, when attachment to a physical workplace defined the degree to which you could remain in the workforce.”
By 2030 there will be more than 70 million people in the US 65 years old and over, double the size of that same demographic in 2000. In addition number of employed workers over 55 has risen by 50% over the past decade as boomers move through the workforce! The bottom line is that retirement is a construct of the past, when attachment to a physical workplace defined the degree to which you could remain in the workforce.
By the way, shunning retirement is not just an economic issue. Most of the boomers I talk to are well off. It’s not about the money. There is something even more important at play. Simply put, they really are the first generation to have the choice to remain intellectually and economically engaged as much or as little as they want for the rest of their lives.
Game Changer #6– The Other 5 billion
The final factor that we seem to consistently dismiss is the one that will amplify everything else I’ve already talked about, it’s the Internet on-boarding of the world’s population. Today we can generously estimate that about 2 billion people have regular access to the Internet. Over the course of the next 10 years we will see the affordability and the mobility of the Internet reach a point where every person on the planet has the ability to not only access the vast stores of information but more importantly educate themselves and then contribute to a global network of commerce. The easiest route to do that with the least amount of economic friction will be entrepreneurship
Economist Paul Romer once said to me, “we fail to appreciate the magnitude of change because opportunities do not add up, they multiply.” That is definitely the case when it comes to the future of entrepreneurship and small business.
“we fail to appreciate the magnitude of change because opportunities do not add up, they multiply.”
There’s no doubt that ignoring these six game-changers means that you’ll miss out on the opportunities that lie ahead, but take heart; standing under that streetlamp will give you the best view of each one as they pass you by.
This post was originally published on Inc.com.
The opinions expressed herein or statements made in the above column are solely those of the author and do not necessarily reflect the views of WTN Media LLC.