Becoming your own boss continues to have a record level of appeal among North Carolinians as an economic ripple effect from the COVID-19 pandemic.
There were 46,868 new businesses launched during the first quarter, which beat by 4.2% the previous record of 44,930 in the first quarter of 2021.
That included 1,235 just in Forsyth County.
March yielded the third highest month total for business creations at 17,263, which trail just May 2021 and June 2021.
In contrast, there were 26,134 businesses created in the first quarter of 2020, which included the first two weeks of the pandemic, along with 25,605 for the first quarter of 2019.
For 2021, there were a record more than 185,000 business-creation filings, compared with the previous annual record of 127,000 in 2020.
Elaine Marshall, North Carolina’s secretary of state, said the record number of created businesses is just another sign of “North Carolina’s determined entrepreneurial spirit continues to assert itself.”
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Much of the pandemic’s impact on the local and state economies has been focused on the overall decline of available workers, particularly those in minimum- to low-wage jobs.
“These business owners are telling us in surveys that they see new opportunities to put money in their pockets and jobs in their communities,” Marshall said.
“These are not folks who lost their jobs and have nowhere else to turn.”
Marshall said the pace of new business creations “is a big boost to our state and local economies.”
“We are doing everything in our power at the Secretary of State’s Office to get these new business owners up and running as rapidly as possible.
“We are aggressively looking for ways to help these North Carolina business owners get access to the many resources available to help their new ventures become successful.”
Can it last?
The proliferation of new businesses in North Carolina is understandable, but is likely peaking, said Michael Walden, an economics professor at N.C. State University.
“During time off in the pandemic — and with financial support — people had time to think about their future, with many concluding they wanted to start their own business,” Walden said. “Borrowing costs were also at historic lows.
“But, with interest rates now rising, financial support mostly gone, high costs due to inflation, and fears of a possible recession later this year, I expect the rate of new business starts to decline.”
Keith Debbage, a joint professor of geography and sustainable tourism and hospitality at UNCG, has cautioned that the surge in business creations “certainly contradicts the long-term trend of declining levels of entrepreneurship in the U.S.”
“It remains unclear to what extent the growth in new business creations is a response to opportunity, or the result of necessity, such as layoffs.
“During the pandemic, it is possible that homegrown entrepreneurship may be the only viable and safe source of economic growth for many folks — triggered not by a nurturing entrepreneurial ecosystem, but by a strategy of last resort,” Debbage said.
Mark Vitner, senior economist with Wells Fargo Securities, said that “the strength in business startups reflects growing optimism in the overall economy, particularly at the local level.”
“Unfortunately, the growth in first-quarter startups actually captures growth over the past year, and does not reflect the uncertainty that has arisen out of Russia’s invasion of Ukraine and the hawkish turn at the Federal Reserve.”
An uptick in business creation filings during an economic downturn or a major employer shakeup is not unusual.
For example, when First Union Corp. bought Wachovia Corp. in 2001, about 1,300 local job positions either were transferred to Charlotte or eliminated over the next 24 months.
Some former Wachovians left the area in pursuit of similar skilled and paying employment.
Some small businesses, particularly community banks, gained access to former Wachovia employees who chose to stay, either to continue raising their family or out of preference for the lifestyle here.
Others formed boutique small businesses or went in a new direction altogether.
This time around, the availability of federal pandemic relief compensation gave the unemployed or furloughed more time to plot their next move, including a business startup.
There’s also been a ramp-up in entrepreneurial assistance from local groups, such as Winston Starts, Greater Winston-Salem Inc. and downtown Winston-Salem’s Innovation Quarter.
For example, Innovation Quarter (IQ) recently debuted its business accelerator initiative that brings together entrepreneurs in the regenerative medicine space with the RegenMed Development Organization.
The goal is speed up the translation of technologies to patients, also known going from the bench to the bedside.
This proximity provides access to high-level biomanufacturing equipment, industry expertise and talent to support novel prototyping and commercial product development through the ReMDO Test Bed.
The first tenant is BioMedInnovations, which moved from Raleigh to further developing its technologies toward solutions for tissue and organ perfusion and preservation.
The group’s current focus is on reduced scale mobile platform, known as recove, which is designed to extend the amount of time that organs prepared for a transplant can travel to a potential recipient. It is pursuing Food and Drug Administration clearance so it can begin to focus on the kidney transplant market.
“Joining the ReMDO Innovation Accelerator space in Winston-Salem has just enabled us to find collaboration, engage in the ReMDO Testbed with our devices, and to launch faster,” said Carrie DiMarzio, the group’s chief executive. “We are learning and gaining feedback to improve our designs of these devices.”
Gary Green, ReMDO’s chief operating officer, said that “with support from WFIRM and many area businesses that support the regenerative medicine field in areas such as the production of reagents and diagnostics, we believe these companies can be successful in getting their technologies commercialized.”
The initiative represents the latest step for the research district and Wake Forest Institute for Regenerative Medicine, some of which dates back to the late 1990s.
In May 2020, iQ Healthtech Labs debuted, described as a physical and virtual hub at the crossroads of health care and technology.
The hub’s aim is shortening the development cycle of products, this time where the health care and technology sectors intersect.
The hub is set up to foster collaborations between IQ tenants, Wake Forest Baptist Medical Center research, traditional and non-traditional partners, commercial markets and potential investors.
One entrepreneurial assistance effort that recently debuted is the Winston-Salem Partners Roundtable Fund.
The goal “is to provide meaningful access to capital with the goal of helping early-stage companies scale.”
Fund officials are looking for companies ready to proceed with seed-level investments that typically will range from $100,000 and $300,000, “but have the potential to be larger.”
Companies must be based in or committed to relocating to Winston-Salem and/or Forsyth County to be eligible.
Fund officials said the initiative “is industry agnostic, but preference will be given to startups in industries in which Winston-Salem has expertise.”
This includes health care, information technology, data analytics, apparel, education, virtual reality, automotive technology and unmanned aviation.
Selected companies will have access to the management expertise of the fund’s more than 60 accredited investors.
During an investment round, the fund may require participants to allow a representative to sit on its board of directors or occupy a formal observer’s role.
“Some of the most innovative new ideas in many industries are being developed right here, and our entrepreneurial network fosters the growth of those ideas into thriving companies,” says Steve Lineberger, who is serving as a partner for the fund.
Meanwhile, the city of Winston-Salem is in the midst of its Small Business Plan competition, sponsored by its Office of Business Inclusion and Advancement.
The goal is promoting job creation and small businesses by helping entrepreneurs develop sound business plans. Two winners will each receive a $5,000 grant for start-up costs, up to $5,000 in a potential matching micro-loan and technical assistance.
Eligible submissions must be for micro-businesses (five employees or less) located within the Neighborhood Revitalization Strategy Area. This area includes portions of the northern, southern and eastern quadrants of the city.
The businesses must also create low- to moderate-income jobs or benefit low- to moderate-income residents. Staff from the office’s Business Development Division will be available to provide assistance throughout the competition.
The top finalists will have the opportunity to submit completed business plans in June.
The finalists will be judged by the Small Business Loan Committee and the winner announced in August.