Each year the Global Entrepreneurship Monitor provides a look into the health of entrepreneurship around the world. In the 23rd edition, which was published recently, they aim to fully examine the extent to which the Covid pandemic has affected entrepreneurship.
The report is the culmination of interviews with around 150,000 individuals from 50 countries and allows GEM to look at both the rates of entrepreneurship in each country as well as things like the motivation and attitude of entrepreneurs globally.
Starting up
Interestingly, while we may assume that entrepreneurs are driven by a desire to change the world, the report suggests that the motivation to start a business tends to be somewhat more down-to-earth. For instance, we’re more likely to start a business if we know someone who has also done so, or if we can spot an opportunity locally that we perceive as being relatively easy to exploit.
Even if such opportunities are spotted, however, it’s still important that the potential entrepreneur feels confident that they will be able to capitalize on it.
“The recognition of good opportunities to start a business may not be sufficient enticement to actually do so if individuals do not see themselves as having the necessary skills, knowledge, and experience, or if they fear that the business they start might fail,” the authors explain. “Hence, self-perception and attitudes towards risk can be important influencing factors on the decision to start a new business.”
Limited ambitions
Perhaps unsurprisingly given the intense economic uncertainty, the report highlights a decline in startup activity during the pandemic. It also demonstrates quite clearly that while most of the attention and interest is on “unicorns” that achieve enormous valuations, the majority of startups are small enterprises hiring a handful of employees. Indeed, roughly a quarter of all new businesses don’t expect to be hiring anyone but themselves in the next five years.
The results illustrate how, for many, creating a business isn’t so much a case of trying to change the world as it is to keep one’s own head above water.
“This may be indicative of high levels of informal “survival” businesses, created during economic hardship when no other alternatives or social safety nets are available, and when people resort to entrepreneurship as their only fall-back solution,” the authors say.
This was especially so of older entrepreneurs in the developed world, where a relative scarcity of jobs prompted many entrepreneurs to report that their primary motivation was simply to earn a living.
Tech-enabled
Given this relatively limited scope, it’s fair to say that the majority of new businesses are not of the high-tech variety we often read about in the media. Despite that, many entrepreneurs did say that they were strong users of technology, with this perhaps driven in large part by their need to complete tasks without hiring other people to help them.
This was perhaps also reflected in the difficulty many entrepreneurs reported in terms of actually starting a business. Indeed, roughly half of respondents thought that it had become tougher during 2021. There was a degree of optimism around the opportunities presented by the pandemic, however.
“Consistent with crises throughout history, the COVID-19 pandemic crisis surfaced new opportunities for entrepreneurs around the globe,” the authors conclude. “However, despite positive perceptions of the ease of starting a business, self-confidence in their skills and abilities, and other factors, many entrepreneurs were constrained by the fear of failure. Policymakers could allay much of this fear by drawing greater attention to entrepreneurial success stories both large and small and implementing risk-mitigating initiatives that reduce real and perceived impediments for startups.”
