More Workers are Becoming Entrepreneurs

An interview with Dr. Lakshmi Balachandra, a professor of entrepreneurship and a fellow in the National Science Foundation’s Technology Innovation and Partnerships Directorate program. 

The pandemic unleashed a flurry of new entrepreneurs. If the economy goes into a recession, do you think that trend will continue? Yes. In fact, history has taught us that it’s typical for economic downturns to coincide with rising rates of entrepreneurship. Necessity is the mother of invention. If people can’t find work or are dissatisfied with their jobs, they’re much more likely to want to start their own business and do something on their own.

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Why did the pandemic lead to an increase in individuals going into business for themselves? One of the biggest drivers for entrepreneurship is lifestyle. The pandemic illuminated how challenging work has become for people faced with difficult commutes and the high cost of housing, child care, elder care—the list goes on. It also led to the recognition that your time has incredible economic value that you don’t have to sacrifice when you work on your own. People who become entrepreneurs certainly see an economic opportunity, but the bigger motivation is that they want to be their own boss and set their own hours. You can structure your work in such a way that you gain your own internal rate of return, with the benefit of adding value to your lifestyle. 

Women founders secured only 2.3% of venture capital funding in 2020. What barriers do women and minority entrepreneurs face? This is the question that I’ve been working on and dealing with for over 20 years. Women and minorities aren’t typically seen as leaders or managers or entrepreneurs, so they’re already at a disadvantage, and if anything, COVID made it worse. With networking canceled or limited to Zoom, networking opportunities for people other than those already in the funding network receded.  

How can they overcome those barriers? A lot of how you get funded is based on how you’re evaluated as an individual—meaning what kind of potential do investors see in your ability to understand the market and drive a business to financial success. We’ve done all sorts of things to try to get women and minorities more access to capital, but there’s nothing driving venture capitalists to change the way they do business. They still can get investments from governments and limited partners. There has been a lot of talk about training women and minorities to solve the problem. They don’t need training. They just need money.

What advice do you have for aspiring entrepreneurs? It’s all about conversations. If you want to know how someone was able to build a business, people are often willing to share their story. Find out how they got the start-up capital and whether that’s something you could do. The more people you meet, the more connections you make to learn more. And besides meeting and talking to people, do your research. Learn about what the competition looks like, potential customers’ buying habits, and the rules and regulations for your business.