In the Great Recession of 2008 and 2009, business applications slumped. But according to research analyzing other data in the Journal of Economics & Management Strategy, the rate of entrepreneurship actually rose. Despite the housing crisis and the credit crunch, the study found, the push was driven by those without jobs looking to survive. One opportunity they saw was a different way to monetize their homes and cars, ushering in the age of Big Sharing. In fact, the downturn birthed a herd of today’s unicorns, including Uber, Airbnb, Slack, Pinterest, and Groupon.
Although what’s happening now is very different, “anytime you have a big change, whether that’s an economic downturn or something like COVID, it brings up new needs,” says Rashmi Menon, entrepreneur in residence at the University of Michigan’s Zell Lurie Institute for Entrepreneurial Studies. “Needs are at the foundation of a startup, right? If they don’t address a need, you don’t have a business. When everything just goes along the same as always, it’s harder to find new opportunities. Even when you do, large companies will just capitalize on them, and it’s tough to get in.” Startups also benefit in downturns because resources like talent and office space become cheaper, and large incumbents become weakened. That’s partly why we’ve seen whole virtual economies spring up during the pandemic around grocery shopping, healthcare, and work.
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