Business Starts in Connecticut During Pandemic Exceed Previous Years; Entrepreneurship Increasing

Between March and October of 2020, there were 26,361 business starts in Connecticut, the largest number during that 8-month period in at least the past decade, and nearly 10,000 more than during the same period a decade ago, in 2010.

The 26,361 business starts during those eight months this year compared with 11,443 business stops, for a net gain of 14,918 – the second highest total in equivalent periods in recent years in business entities registered in Connecticut, according to business filings with the office of Secretary of the State and data analyzed by the Connecticut Data Collaborative.  During the same period a year ago, Connecticut experienced a net loss of 7,721 businesses, with 24,744 starts and 32,465 stops.

Appearing on the Connecticut podcast Win the Future, Lieutenant Governor Susan Bysiewicz said that with the pandemic in full swing, “you would expect to see a record number of small businesses failing. And interestingly, what you see is the exact opposite.” 

Bysiewicz suggested that “one reason it's happening is because we still have very high unemployment. The real employment rate is somewhere between 11 and 13%, give or take. And so some people who have lost their jobs are thinking I always wanted to start a business, they had an idea in the back of their mind and wanted to go ahead and start a business.”

During the same March-October period in 2019, a year before the coronavirus changed the business and economic landscape, there were fewer business starts in Connecticut (24,744) than this year, and nearly three times as many business stops (32,465), for a net loss of 7,721 registered businesses in Connecticut.

 The Business Starts and Stops data, according to officials, are intended to provide a general overview of the number of business entities forming/registering and dissolving/withdrawing in a given month. 

There is more to that story of the “why” and the “who,” points out Fran Pastore, Chief Executive Officer of the Women’s Business Development Council, with offices in Stamford, Derby and New London. “Women of color dominate the retail, hospitality, and healthcare sectors. Many have lost their jobs because of COVID-19. They are turning to entrepreneurship as a logical and reachable goal to economic self-reliance. In the past nine months, WBDC has witnessed an exponential surge in the number of startups seeking its services, particularly women of color.”

Comparing net gains in recent years during the March-October period, the net gain in business starts was 15,561 during the same 8-month period in 2018; 11,767 in 2017; and 13,420 in 2016. It is anticipated that when the November and December numbers are in, the trends during the past eight months of 2020 will continue.

PBS reported in September that “Applications to start new businesses have surged significantly above normal in the last few months, as ‘pandemic entrepreneurs’ look to make money on their own in a tight labor market, or see the crisis as an opportunity to realize a long-held dream.”

That same month, the Wall Street Journal reported that applications for the employer identification numbers that entrepreneurs need to start a business had passed 3.2 million so far this year, compared with 2.7 million at the same point in 2019, according to the U.S. Census Bureau.

Even though new businesses inevitably start small, they are a critical engine of job creation, the Journal reported. Startups have historically accounted for around one-fifth of job creation, John Haltiwanger, an economist at the University of Maryland who studies the data, told the Journal. Firms with fewer than 500 employees accounted for nearly half of private-sector employment in 2017, according to the Census Bureau.

"My heart goes out to the local businesses that have had to close because I know that it is never an easy decision,” said Sarah Bodley, Executive Director of Hartford-based reSET, which provides a range of services to business start-ups, including a highly regarded accelerator program. “The silver lining during COVID is that we have also seen amazing innovations across industries. We had a resounding number of qualified applicants to this year's Impact Accelerator and the accepted cohort really wowed us. This shows me that people are recognizing that times of crisis can also unlock creativity and innovation, and in this case, new ways of doing business.”

“The companies that come through reSET are looking to make real impact in their communities with business,” Bodley added. “Now more than ever, that is needed. I think there is a heighted sense of motivation to create the world we all want to leave behind for our kids and grandkids, and for entrepreneurs that's through more sustainable business. If it's not now, when?"

A report from the Global Entrepreneurship Monitor (GEM), sponsored by Babson College and Baruch College, finds that 27 million working-age Americans, nearly 14%, are starting or running new businesses, Forbes magazine reported earlier this year.  And Millennials and Gen-Z are driving higher interest in entrepreneurship as 51% of the working population now believes that there are actually good opportunities to start companies, according to their data. 

The number of business starts in Connecticut between March and October in previous years during the past decade were as follows: in 2010 there were 16,921; in 2011 there were 17,653; in 2012 there were 18,496; and in 2013 there were 20,884.  The number of business starts registered with the state during the March through October period dropped below 20,000 the next two years - there were 19,607 in 2014 and in 2015 there were 19,767.

In recent years, the number of business starts during that same calendar period once again exceeded 20,000 each year:  in 2016 there were 23,452, in 2017 the number dropped slightly to 21,718; climbing in 2018 to 23,550, and in 2019 there were 24,744. But the peak year, during the March-October timeframe, in the midst of the coronavirus pandemic, has been this year.