Startups

U.S. startups showed the strongest growth in Black communities during the pandemic

  • 1 min Read
  • June 3, 2021

Author

Escalon

Table of Contents

A sizable jump in the number of U.S. startups during the COVID-19 pandemic has been the strongest among Black communities, particularly those in higher-income areas of New York City, Houston and Atlanta and parts of Florida, according to a new report by the National Bureau of Economic Research, based on data from the Startup Cartography Project.

While other studies have identified an acceleration in entrepreneurship across the U.S. in 2020 versus 2019, this is the first to focus sharply on the pattern of new businesses formed in terms of race and socioeconomic status. 

The study analyzed state-level business registrations from Georgia, Kentucky, New York, Tennessee, Texas, Vermont, and Washington and Florida.

Key findings

  • In the NBER’s study, overall new-business registrations increased by 21% in 2020 over 2019. A total of 250,000 more new businesses were launched in 2020 versus 2019 across these states.

  • This uptick  outpaced that associated with any previous economic disruption.  

  • The study found significant heterogeneity in startup growth across the states tracked. New York City and Georgia had a 45% and 57% increase in startup formation, respectively, in 2020 versus 2019. Washington had a 6% improvement.

  • Improvements in the rate of entrepreneurship were not uniform within states. Among New York City’s boroughs, Manhattan registered a decline in entrepreneurship relative to 2019. The Bronx and Brooklyn had a significant rise.

  • New business growth was the strongest in predominantly Black communities in Atlanta, Houston, New York City and southern Florida.

Report insights

The report’s authors suggest that the expansion of new businesses formed in majority-Black communities in 2020 may be at least partly attributed to two central factors. 

One is that job losses associated with the COVID-19 pandemic likely prompted some people to risk bootstrapping a business in order to make a living. 

The urgency of finding a new source of income was more pronounced for Black adults, whose unemployment rate was 9.9% in the last quarter of 2020, nearly double the white unemployment rate of 5.8%, coupled with slower employment recovery gains.

What about the stimulus?

The NBER report cites a distinct correlation between federal relief initiatives amid the pandemic and the jump in small business formation in predominantly Black communities. 

Startup growth in high-income Black neighborhoods declined by more than 50% in the weeks prior to the implementation of March 2020’s $2.3 trillion Coronavirus Aid, Relief and Economic Security Act, then rose to 50% above 2019 levels three months afterward.

Within two weeks of the passage of the Supplemental Appropriations Act, startup growth in high-income Black communities also increased significantly.

Takeaway:

The NBER’s findings suggest that the pandemic’s broad-based federal economic relief initiatives played an active role in moderating persistent racial inequalities in entrepreneurship, changing the trajectory of entrepreneurship in the U.S.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

People Management & HR

Streamlining HR Processes, Best Practices for Small Business Owners 

Human Resources (HR) might feel like an afterthought for many small business owners juggling day-to-day demands, yet it has a...

Read More
People Management & HR

Streamlining HR Processes, Best Practices for Small Business Owners

Human Resources (HR) might feel like an afterthought for many small business owners juggling day-to-day demands, yet it has a...

Read More
People Management & HR

Leveraging AI for Efficient People Operations

Artificial intelligence (AI) isn’t just for tech giants anymore—it’s increasingly accessible to small and mid-sized businesses seeking a competitive edge...

Read More
Accounting & Finance

How to Set Up Payroll, A Guide for Small Business Owners 

Setting up a payroll system is an essential step that helps small business owners pay their employees accurately and on...

Read More
Accounting & Finance

Financial Planning for the Future, Setting Long-Term Business Goals

While small businesses must handle day-to-day tasks—like managing payroll or closing monthly books—long-term planning is the compass that keeps them...

Read More
People Management & HR

Benefits Administration, What Small Business Need to Know

Benefits administration can be a game-changer for small businesses aiming to attract and retain top talent. While salaries remain an...

Read More
Accounting & Finance

AAP vs. Cash Accounting: Which Method Is Best for Your Growing Business? 

Choosing the right accounting method can significantly impact how you track financial performance, manage taxes, and plan growth. Two common...

Read More
Accounting & Finance

Beyond Bootstrapping: Advanced Cash Flow Management for Scaling Companies 

Bootstrapping—financing growth through internal cash flow—is a hallmark of many successful startups. But as businesses mature past their initial stage,...

Read More
Technology & Security

Building a Scalable Tech Stack: How to Choose the Right Tools for Growth 

In today’s business landscape, technology is more than a convenience—it’s a strategic asset that can supercharge growth. But as you...

Read More