'Put A Pillow Over Your Head Or Do Something': The Story Behind Colorado's Pandemic Entrepreneurs
On a chilly morning one recent Saturday at the City Park farmers market in Denver, a steady stream of customers stopped by the booth where Annabelle Shin was selling her wares. As the owner of Preserve, a small company that makes and sells healthy frozen pet treats, Ms. Shin greeted all of her customers – both furry and less so – with cheery remarks about breeds, babies and the varieties of probiotic goat-milk yogurt based ice cubes she keeps in a cooler behind the table.
That table is bedecked with wooden boards displaying samples of squash, blueberries and mussels. “We're a whole foods based company for pets. So, what's on the table, it represents the ingredients that we use in our treats,” Ms. Shin explained. Her kiosk has a gourmet feel to it – it’s designed like a boutique – right down to the cute pug on the company logo. Nothing about her business screams “pandemic.” But Preserve is very much a product of the COVID-19 pandemic: the company was born in March of 2020.
Ms. Shin was furloughed from her job and said she was scrambling. Instead of sending out resumes in a tanking job market, she decided to make a go at a project she had been considering passively for years.
As Colorado emerges from the COVID-19 pandemic, economic experts are bullish about the state’s recovery in the coming year. But even long before vaccination drives were rolled out, a lot of Coloradans, like Ms. Shin, were starting new businesses on their own.
Secretary of State Jena Griswold recently reported nearly 150,000 new businesses registered with her office in the 12 months leading up to March, 2021 – an increase of nearly 20 percent from the previous 12 months. “New entity filings hit a new record in Colorado,” Griswold said at a recent press conference, “showing that Colorado entrepreneurs, even in the midst of the recession, are still at it. Entrepreneurship remains strong.”
Disaster Entrepreneurship – It’s a Thing
Booming entrepreneurship seems to fly in the face of the far more common pandemic narrative of businesses struggling or going under. Jeff York is research director at the Deming Center for Entrepreneurship at the Leeds School of Business at University of Colorado Boulder, and host of the Creative Distillation Podcast. He says he saw the pandemic boom coming. “The only real thing that predicts entrepreneurial opportunity is radical change that happens quickly,” he said. “In the wake of natural disasters, for example, you'll see an uptick in entrepreneurship.”
Mr. York also pointed to community engagement as a driver of disaster entrepreneurship. ”You see the community suffering around you, that leads to people taking entrepreneurial action,” he said. “They try to figure out ways to both create for-profit ventures. But also, to try to solve some of the problems they see happening around them.”
The pandemic also redefined risk, according to Brad Werner, faculty director for entrepreneurship at the Deming Center for Entrepreneurship, and podcast co-host to Mr. York. “I think that it gave people courage. You had two options when the pandemic hit, put a pillow over your head and hope for it to go away or do something.” He said behaviors that might seem risky in normal times could look more practical when life is upended.
“[Risk] is a very personal thing based on life experience,” Mr. Werner said. “The pandemic was leveling in that people don't have jobs, people are dying. It's an entirely different outlook.”
Sheer necessity played a role, too. Dawn Thilmany is an agricultural economics professor at Colorado State University. She describes entrepreneurship as a push-pull dynamic. “The push part is that people lost their jobs, were furloughed or whatever, they were pushed into entrepreneurship because they didn't have any other opportunities,” she said.
As for the pull, “you see a really clever idea. No one's acting on that,” Ms. Thilmany said. “There definitely was a pull here and it was the shift to online. We saw billions of dollars shift from people eating out to eating at home. People were spending more money on more interesting quality things and local, regional, entrepreneurial.”
Stephan Weiler, an economics professor at Colorado State University thinks the federal stimulus money also helped people stomach the risk of entrepreneurship. “The CARES Act stimulus dollars coincide with upticks in entrepreneurship,” he said. “Basically, the checks hit and entrepreneurship went up that month and the following month. It happened all three times that the checks were sent out.”
Not all New Businesses Are New Businesses
Not all of those stimulus checks were used to start brand new businesses. The data is still out, but there is good evidence to suggest that a lot of this past year’s entrepreneurial activity – those nearly 150,000 new business filings – came from existing business owners. “Not new people starting businesses,” Mr. Weiler said, “But entrepreneurs that got hit in the epidemic, the first wave, and are restarting their businesses.”
Dawn Thilmany says a lot of new business filings actually reflect existing business owners pivoting to new distribution channels during the pandemic. “They're doing everything from markets to aggregating things from the vendors that would normally come to a farmer's market and doing delivery,” she explained. “you can’t do that under the title of the farmer’s market anymore. [you have to] go make a new LLC.” She says the move to online distribution just might be the biggest shift in entrepreneurship in the last year.
The experience at agencies that help small business owners bears this out. Small Business Development Centers on the Front Range saw a spike in existing business owners looking for help staying open. But Lisa Hudson, who directs the East Colorado Small Business Development Center, said she saw a completely different story play out with new entrepreneurs. “We saw a drastic drop in the number of people who wanted to start businesses coming in,” she said.
There is also reason to believe that pandemic entrepreneurship may have been especially strong among people of color, according to a new working paper from the National Bureau of Economic Research. Stephan Weiler says that of all racial groups, Black business owners were hit the hardest by the pandemic. “They experienced a 41 percent drop in business activity,” he said “basically double the national average.”
But, according to new working paper from the National Bureau of Economic Research, Black neighborhoods nationally saw the most of new businesses start up. “[Black business owners] were the hardest hit,” Weiler explained, “They have been thrown out of their jobs as entrepreneurs. They're the ones who are most likely to get started again.”
That national trend might hold true in Colorado. The Rocky Mountain Micro-Finance Institute trains aspiring entrepreneurs and provides seed loans to help get their businesses off the ground. Spokesperson Sarah Craft says entrepreneurs of color overwhelmingly make up their clientele – and that demand from that clientele has remained very strong throughout the pandemic.
Craft attributes this year’s strong entrepreneurial drive in Colorado’s communities of color to two major cultural forces that defined 2020. It was “the combination of the pandemic and the BLM movement being so strong,” she said. “People, businesses and organizations wanted to pour resources into the BIPOC community and business owners. That provided a lot of aspiring entrepreneurs with some hope.”
Any business expert will tell you that the vast majority of new ventures fail within the first few years. So the pandemic entrepreneurial boom could be fleeting.
But this pandemic year has been exceptional in countless ways, and Jeff York thinks that could translate to better prospects for fledgling businesses for a number of reasons. “One, you're going to be forced to start small,” he said. Starting small is always his number one piece of advice to new entrepreneurs. “They're not going to experience accelerated growth rate where they think, 'oh, everything's going great' and then they just grow too fast and invest too much too quickly.”
Pandemic conditions encouraged people to start on a hyper-local scale – which also turns out to be an advantage, according to Brad Werner. “You start with a couple of people and you're testing from day one,” he explained. “You're not putting things on paper or thinking about things for a couple of years - Should I or should I? You act. And by acting, you create that feedback loop of what works and what doesn't work.”
Creating a customer base from scratch is typically a huge hurdle for new business owners. But this year may have given them an edge, according to Jeff York. “People had to change their behavior during the pandemic,” he said. “And once people start to change their behavior about some things, they tend to psychologically be more willing to change your behavior about other things.”
They might be more willing to change their behavior about things like sharing locally produced frozen treats with a favorite animal pal. Under the Preserve banner at the farmer’s market, Annabelle Shin is counting on just that.
She has invested about $10,000 into her company in the 15 months she’s been operating, and so far, it seems to be paying off. “I've gone beyond breaking even. I am making a profit,” she said. ”But it's not enough for me and all the expenses in my personal life. So I'll take whatever job that I can in order to support this venture.”
The frozen pet treats are available locally at farmers markets -- and a handful of retail stores in Denver. Business is now brisk enough that Ms. Shinn is looking for a permanent commercial kitchen where she can manufacture her treats. She’s also looking into hiring someone to help her keep production in line with demand, and to have an extra hand at the farmer’s market.