The best businesses are often born in the worst times
At 13 years of age, Joel Hellermark taught himself to code. At 16, he launched his first company, a video recommendation service. Now a veteran entrepreneur at 24, Hellermark has just raised $18m to expand Sana Labs, the Swedish digital education start-up he founded. “I am a function of all the benefits of growing up today,” he says.
While many people his age highlight intergenerational unfairness, Hellermark says he is seizing the opportunities his generation has been the first to enjoy. Among these he lists: democratisation of world-class education (he taught himself machine learning by following online courses from top US universities); the ever-cheaper costs of technology such as cloud computing; and the ability to connect with prospective employees and customers anywhere in the world instantly online.
With the digital education market booming as a result of the pandemic, Hellermark has the ambition to create one of the world’s most valuable companies. “That is the opportunity we are going for,” he says.
Such entrepreneurial zeal has been fuelled by the opening up of finance, giving budding entrepreneurs easier access to money than ever before from angel investors, seed funds and crowdfunding sites. While global stock markets remain exuberant and interest rates low, investors have been pouring money into later stage venture capital, too. “When you invest, you’re shaping the future,” says Marie Ekeland, a French tech investor. “You’re not just following the wind, you’re making it blow.”
In different respects, Hellermark is both exceptional and increasingly typical. Exceptional in that his restless energy and relentless hustle mark him out as a natural entrepreneur. Typical in that he embodies a new wave of entrepreneurs intent on building careers outside the traditional corporate world.
The pandemic has triggered a surge of new business formation across many countries as the downturn has convulsed labour markets. In the US, 488,000 new business applications were made last month compared with 232,000 in April 2020. France has logged record levels of business formation, with similarly strong increases in the UK, Germany and Japan. “We are definitely living through the age of entrepreneurship,” Rishi Sunak, the UK chancellor, said in a recent interview.
It is hard to say how many of these new businesses have been formed out of desperation, with unemployed workers registering companies to sell their own products or services in the gig economy. But the data undoubtedly also reflects an upsurge of interest in entrepreneurship across many countries, particularly among the young.
Entrepreneur First, an investment firm that runs six-month training programmes for graduates in the UK, France, Germany, India, Singapore and Canada, says it has received an 80 per cent year-on-year increase in applications. “This is a pandemic-inspired acceleration of a secular trend,” says Matt Clifford, the co-founder of EF. “Entrepreneurs thrive on volatility,” he says. “This pandemic has created volatility. It is a rational response to opportunity.”
The latest economic upheaval may provide an interesting twist to the long-running debate about whether entrepreneurs are born or made. One consequence of last year’s downturn may have been to encourage many more high-achieving graduates to found a start-up than would otherwise have been the case.
An updated research paper by Isaac Hacamo and Kristoph Kleiner of Indiana University found that a 1 per cent increase in the US unemployment rate has historically resulted in a 0.5 per cent decrease in the likelihood of landing a job in a top consulting, finance or technology firm.
After studying more than 640,000 LinkedIn profiles of those graduating in the US between 1996 and 2014, the researchers found that so-called “forced entrepreneurs”, who launched businesses in previous downturns, tended to thrive. Indeed, they were more likely than “voluntary entrepreneurs” to survive, innovate and receive venture backing. Among their sample of 36,000 entrepreneurs, individual founders successfully listed 141 companies, including Dropbox, Airbnb, Instagram and YouTube. “I would expect to see a similar impact now,” says Hacamo.
Many VC companies raising money during the latest economic downturn have trotted out the line that some of the best businesses have been born in the worst recessions. This may even be true. It will be fascinating to see what exciting companies emerge from last year’s economic wreckage.