New Businesses Starting At Record Rates Despite The Pandemic's Effect On Economy
LULU GARCIA-NAVARRO, HOST:
OK. You may be surprised to hear there's currently a startup boom in the United States. Despite the pandemic - or maybe because of it - new businesses are starting at record rates. Here's Greg Rosalsky of NPR's Planet Money.
GREG ROSALSKY, BYLINE: In 2019, Roberto Ortiz, a veteran software designer, was working hard on a new app with a couple of friends. They designed it. They developed it. They pitched the idea to investors and began raising money. Ortiz even moved his wife, his dog and his 3-month-old baby from Denver to San Francisco so they could launch it. By then, it was early 2020. But there was a problem.
ROBERTO ORTIZ: We were building a platform that connects wholesale food providers to restaurants.
ROSALSKY: (Laughter) Oh, no.
Oh, no because the pandemic was about to destroy the restaurant industry.
ORTIZ: So picture me and my co-founders trying to sell technology to restaurant owners when COVID just shut down their business.
ROSALSKY: The business was ruined. On Zoom call after Zoom call, they debated what to do next. And then it hit them. What if they made a better version of Zoom, one that would be a stronger replacement for high-powered business meetings, product launches or conferences at fancy hotels.
So Zoom is sort of like the Holiday Inn or something. And then like...
ORTIZ: It's the Motel 6, yeah.
ROSALSKY: Ortiz and his co-founders decided they could build something prettier and fancier than Zoom, like the Ritz-Carlton for virtual events. And with months of hard work, they built it. It's called Welcome. They officially launched a couple weeks ago. They've got numerous clients and over 30 employees. They've already raised $12 million. They've come a long way since March.
ORTIZ: It's one of those things where we have to pinch ourselves often.
ROSALSKY: There are a lot of entrepreneurs pinching themselves these days. Welcome is just one of 4 million new businesses registered in 2020. Welcome to the startup boom. Economist John Haltiwanger has been helping the Census Bureau track all this. When it comes to new business applications, he says, they've never seen anything like this before.
JOHN HALTIWANGER: It's the highest level on record.
ROSALSKY: The biggest areas of growth are in e-commerce, online retail and online services, which makes sense. The pandemic has devastated activities that require being face-to-face. Most of us don't want to shop at stores, travel on planes or do meetings in person. It's like these new online businesses are growing out of the ashes of old brick-and-mortar businesses. Economists have a term for this. It's called creative destruction. Nobody likes the destruction part. It means jobs lost and dreams dashed.
HALTIWANGER: What you don't want to have happen is destruction and then no creation.
ROSALSKY: There weren't a lot of businesses created during the Great Recession around 2008, and it slowed down the recovery. But the pandemic recession looks like it might be different. We don't know if all these startups will fill the hole of all the jobs lost and destroyed businesses or if they'll even survive after the pandemic ends. But Roberto Ortiz is banking on a new era for virtual interaction in the business world.
ORTIZ: And so is travel really necessary to close a deal? Is it really necessary to gather 5,000 people in one place, or are there alternate ways of getting the same outcomes using and leveraging technology?
ROSALSKY: There's definitely been a lot of destruction in 2020. Hopefully we'll look back and also see it as a year of creation.
Greg Rosalsky, NPR News.
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