SecondMuse's 2022 State of Entrepreneurship in the U.S. study finds that, in the face of challenges, entrepreneurs are deprioritizing corporate social responsibility issues.
Starting a business is difficult even in the best times amid the best circumstances. The overwhelming majority of startups fail in the first decade as entrepreneurs struggle with everything from financing to the daily grind of running a business. So it takes a certain level of confidence, determination, and, above all, optimism to gamble on a great idea. And yet — our latest study, The State of Entrepreneurship in the United States, shows that innovators and small business owners have a bleaker outlook on the economy and their shot at succeeding than they did two years ago during the chaotic early days of the pandemic. It indicates that their focus on the environment and social issues is slipping as they navigate more immediate challenges and, as a whole, underscores the importance of supporting innovators and small business owners, especially those from historically marginalized backgrounds who have long faced the greatest barriers to entrepreneurship.
“It’s exceedingly difficult to be an entrepreneur,” Todd Khozein, Co-CEO of SecondMuse, said, adding that the findings of this latest study underscore the struggles small business owners and innovators face as they navigate both current economic challenges as well as systemic issues.
When we launched our first State of Entrepreneurship study in 2020, unemployment claims were skyrocketing, equity markets were tanking, small businesses were scrambling for loans, supply chains were riddled with problems, and no one could guess when things would improve.
Two years later, amid a spate of new challenges, from inflation to a competitive job market, our new survey of 275 entrepreneurs, which we conducted in collaboration with YouGov, has found that more than three-quarters of polled entrepreneurs do not think the U.S. economy is on the right track, up from 69% in 2020. They are four times more likely to describe the economy as “corrupt” and “inefficient” rather than “inclusive,” whereas two years ago, they were just twice as likely to describe the economy as “corrupt” rather than “inclusive,” “stable,” or “fair.”
The data suggests that while certain economic indicators have improved since 2020, the current challenges they face are substantial enough to sour their outlook and notably change their priorities.
Racial Equality, Environment Deprioritized
The study found, for example, that less than a third of respondents see environmental sustainability and racial equality as key issues, down from 54% and 59%, respectively, in 2020. Poverty and immigration have moved up as the number two and three issues behind healthcare, which remains the top concern among entrepreneurs, with more than half citing it as a key issue.
“These findings reflect trends we’ve observed in our work with entrepreneurs across the country, who are focused on simply surviving in a volatile economy amid supply chain problems, geopolitical instability, and constrained capital,” Todd said.
Co-CEO Carrie Freeman added that the results reflect the reality that humans can only handle so much. “We saw this during the pandemic when all of a sudden environmental priorities were set aside and single-use plastic use went through the roof to protect our health, which at the time was the more immediate concern,” she said. She added that it also reflects the “tragedy of the commons,” in which people don’t see themselves as responsible for addressing environmental or social problems because, ostensibly, someone else is taking care of it.
The study was conducted in March and April of this year amid a period of record inflation, rising interest rates, and other economic and logistical challenges tied to the pandemic and war in Ukraine.
These issues appear to have overshadowed the less immediate but still critical social and environmental problems the country faces. The climate crisis is as urgent as ever, as is the need for all organizations and people in positions of power to work toward a world of inclusivity where all humans have equitable opportunities.
The study found that in addition to deprioritizing these areas, entrepreneurs are also expressing a sense that the economy just doesn’t “work” for people like them, no matter what background they come from.
This apparent pessimism, Todd says, may simply be a reflection of the pandemic-related surge in people starting their own businesses, who are first encountering challenges that have always existed, especially for people from historically marginalized backgrounds.
Indeed, applications to start small businesses in the U.S. have surged since the start of the pandemic. Newcomers wading into the world of entrepreneurship may find that on top of the usual challenges, it is more difficult than usual to hire amid the extremely competitive job market, to manage costs amid record inflation, and to access the financing they need — especially if they come from a historically marginalized background.
Non-white entrepreneurs, especially non-white women, still receive the smallest chunk of the venture capital funding pie, which overwhelmingly goes to educated and connected white men.
Surveyed women and those from lower socio-economic backgrounds cited access to capital as their greatest need, as did immigrants, who also cited a path to citizenship as a key necessity. People who identified as Black, Asian and Hispanic, meanwhile, said they would benefit most from less discrimination.
The study underscores the need for targeted entrepreneur support, particularly for those from marginalized groups and for those with environmental and social justice ambitions who are simply too focused on basic survival to give other goals proper attention.
Fortunately, even amid so many challenges, Carrie points out, there is more money and support for innovators, particularly those from marginalized backgrounds, than ever before.
“The data is concerning across the board, and it boils down to a lot of dismay,” she said. “The bright side is that there is more emphasis on supporting marginalized entrepreneurs than there has ever been in this country. I don’t want to say that the support is abundant, but the reality is that the government, corporations, and investors are very focused on supporting innovators right now, and especially those who historically haven’t received so much support.”
Our vision of a world in which all humans receive equitable opportunities to participate in and benefit from economies and communities depends on innovators and small business owners from all backgrounds tapping that support and enabling them to not just survive but to thrive.
