If history is anything to go by, a handful of entrepreneurs may be coming out of the coronavirus crisis with potentially multi-million dollar businesses under their belt.
That’s according to a new report by the University of Sydney’s United States Studies Centre, which said economic downturns have traditionally tested the resilience of businesses.
And while major economic shocks like the global financial crisis made a huge dent to employment numbers for years, other individuals may find a way to buck the trend.
“In previous US downturns, rates of entrepreneurship have risen alongside rising unemployment rates,” the report said.
Higher unemployment rates can lead to something called ‘necessity entrepreneurship’, where more individuals start businesses as they are in need of income.
Companies like Airbnb, Uber and Dropbox emerged from the global financial crisis, and Australian tech success stories like Canva, Culture Amp and Brighte were founded in the years following the GFC.
While many businesses will inevitably sink, there are some pockets of innovation that surface in response to the crisis: successful businesses will have “radically innovative products”, “high-growth potential” and a view of going global.
Sectors that are already performing strongly in the current crisis are staple goods, food delivery, health and medical services, and products.
Meanwhile, video conferencing platforms like Zoom have skyrocketed, earning founder Eric Yuan nearly $6.11 billion in three months, and the number of Netflix subscribers grew by 15.8 million between January and March this year as people utilise technology platforms for work, socialising and entertainment.
“The emerging market of digital products that bring connectivity, entertainment, information and exercise directly to those staying at home are seeing strong growth.”
‘Fear of failure’: Aussie attitudes to entrepreneurship
But while Australians are actually well-placed to create their own venture, report authors Don Scott-Kemmis and Claire McFarland said Aussies tend to hold themselves back.
Australians are less likely to see a profitable business opportunity than Americans, and are also less likely to act on it than Americans are.
This is despite the fact that more Aussies agree they have the required knowledge, skills and businesses needed to start a business than Americans.
“Fear of failure is a characteristic of Australian entrepreneurs,” said the report authors.
“The Global Entrepreneurship Monitor data shows almost half of Australian entrepreneurs agree they see good opportunities but would not start a business for fear it might fail, compared with just over a third of Americans.”
But this attitude of fearing failure can drive two outcomes among entrepreneurs: one is success.
“There are several well-told stories of Australian companies pitching for funding to US venture capitalists and being criticised for over-ambitious hockey stick graphs only to be told they are actual sales figures, not projections.”
The other result is that the fear of failure has a “chilling effect” on risk-taking and starting a new business.
“Given the lower level of entrepreneurship in Australia, this is an issue that warrants further investigation,” the report said.
“In the coming months as Australia emerges from COVID-19 lockdown, entrepreneurship will be critical to restarting parts of the economy.”
Where will we find entrepreneurship in the midst of the pandemic?
According to IBISWorld senior industry analyst Daisy Feller, the businesses that will succeed will most likely be online.
“The majority of innovation and entrepreneurship spawned by the COVID-19 pandemic is anticipated to take place in the digital space,” she told Yahoo Finance.
“Even though Australians will be able to return to a non-socially distanced way of living after the pandemic, the lockdown has exposed some key areas of opportunity for entrepreneurs.”
She flagged the following four areas as potential opportunities for entrepreneurs:
1. Remote working solutions
As people work from home during the pandemic, remote work platforms have seen a dramatic uptick.
“This trend is anticipated to continue after the pandemic, as businesses seek to strengthen their flexibility to allow parents, people with disabilities and traveling employees to work remotely,” said Feller.
And workers like artists and performers will be looking for new ways to collaborate and present their work, too.
GPs as well as therapists and physios are moving their appointments online, meaning telehealth services like video appointments are seeing higher demand.
“Telehealth innovation is anticipated to extend to services such as remote diagnostic testing,” Feller added.
With people unable to dine out, food delivery and meal box services are enjoying higher demand.
“This trend is anticipated to shift towards home cooking and baking over the next year due to renewed interest in making food at home.”
One upside is that producers like small businesses and farms are able to reach consumers directly, through concepts like boxes of produce straight from the farm.
4. Consumer apps
Covid-19 has significantly disrupted Australians’ lives, and consumers are receptive to new ways of accessing relevant and updated information such as which cafes or retailers are open, or where the least crowded supermarket might be.
“This trend is anticipated to continue over the next five years in combination with sectors such as food, telehealth and transportation,” said Feller.
“In addition, demand for these apps presents opportunities for independent creators that may be temporarily out of work due to the pandemic.”
Meanwhile, areas that won’t see high degrees of entrepreneurship will be consumer goods retailing and wholesaling.
“Negative consumer sentiment and declining discretionary incomes have created a weak retail environment.”