Apocalypse Never

Aaron Dinin has a theory about why the Great Startup Apocalypse of 2020 never happened. It says a lot about what it actually takes to get us to do the things we know need to be done.

MANAGEMENT

The Great Startup Apocalypse of 2020 never materialized: “Businesses worldwide began closing their doors [last March] and everyone in the entrepreneurial community started predicting the Great Startup Apocalypse. Many seasoned startup observers — from venture capitalists to economists — were expecting destruction of cataclysmic proportions, bigger than that of the dot-com boom and bust of the early 2000s or the financial crisis of 2008. ‘We suggest you question every assumption about your business,’ Sequoia Capital wrote in the aforementioned letter that would soon go viral in the wider business-tech community. ... In other words: hunker down, get lean, and prepare to weather the storm.”

• “Every startup immediately trimmed the excess fat from their budgets in ways they couldn’t have all possibly done pre-Covid-19.”

• “The second shift spurred by the pandemic was — as you surely already know — a shift to remote work. ...  Nobody has to commute, employees that work from home are more likely to engage in work activities during nontraditional work hours, and office small talk is eliminated.”

• “In the Covid-19 world, sales teams can close big deals via Zoom. Better yet, the same salesperson can target two enterprise deals on opposite sides of the world in ways that could never have been done previously.”

• The end result: “You’ve no longer got a recipe for a startup apocalypse. You’ve got yourself the perfect scenario for massive growth, which is what appears to have happened ...” READ MORE

THE COVID ECONOMY

In December, Congress authorized a $15 billion grant program for live-event companies, but the money still isn’t flowing: “When Steve Sheldon learned that Congress had authorized a $15 billion grant program for companies that host live events, he felt relieved. With cash reserves at his Long Beach, Calif.-based EPIC Entertainment Group running low, a grant would help him to keep paying his two workers. A month later, the Small Business Administration has yet to say when the program will launch, and Mr. Sheldon said he has been confused by eligibility guidelines the agency has issued so far. Feeling that he couldn’t afford to wait for clarity on such issues, Mr. Sheldon instead applied for a potentially much smaller amount under a separate coronavirus aid program [PPP] of forgivable loans for small businesses that is available now.”

• “The urgency surrounding his decision reflects the dire circumstances facing live-events businesses. Labor Department data show the arts, entertainment and recreation industry lost 800,000 jobs as of January compared with last February, just before the pandemic took hold.

• Many live-events businesses have found it difficult to operate even at reduced capacity because of government restrictions and lack of demand as Americans avoid gatherings for fear of contracting the coronavirus.” READ MORE

REGULATION

Relaxed rules are encouraging a “wonderful, desperate creativity” among stuck-at-home pastry chefs: “Joy Cho was shopping with her mother in a Williams Sonoma store when a display of miniature Bundt pans caught her eye. A pastry cook at Gramercy Tavern until the pandemic came, she bought them. This was early January. The next day, she began composing a sour-cream batter recipe and experimenting with glazes flavored with milk tea, black sesame and other ingredients. By Feb. 1, she was taking orders on her website for boxes of six two-inch Bundts, which could be picked up at her home in Clinton Hill, Brooklyn. An initial batch of what she calls ‘gem cakes’ sold out. So did a second batch. Ms. Cho’s one-woman cake company, Joy Cho Pastry, is a model of the new businesses founded by New York City bakers and pastry chefs who have been put out of work by the pandemic.”

• “Taking advantage of a state licensing exemption that allows ‘home processors’ to sell baked goods and certain other foods with minimal oversight, most of them use consumer-grade ovens and refrigerators in their apartments, supplemented, perhaps, by a utility shelf or a makeshift work table propped up on sawhorses.”

• “With the normal barriers to starting a business gone and the usual pressures of the marketplace scrambled, a wonderful, desperate creativity has flourished.”

• “Joy Cho Pastry [plans] to set up [a] sit-down pastry [shop] when the pandemic recedes.” READ MORE

THE MORNING REPORT PODCAST

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ECOMMERCE

With Americans starting ecommerce businesses at record rates, Shopify is surging: “Eric Girouard launched in September a workwear company, Brunt, selling boots to construction workers on a Shopify site after he saw how quickly his wife, Sarah Girouard, started offering winter hats online. She was making $25,000 to $40,000 a year from a side business she ran entirely by herself, he said. ‘It was a basic website, but it was working and she was getting paid,’ said Mr. Girouard, who had initially expected to spend upward of $100,000 designing a virtual storefront for Brunt. He created his Shopify site for less than $25,000, including the cost of hiring two contract workers. ‘It made me realize the world had changed,’ he said.”

• “Most of Shopify’s more than one million customers are first-time entrepreneurs, said Harley Finkelstein, president of the Ottawa-based company, which will report fourth-quarter results on Wednesday. ‘Imagine a future where everyone is an entrepreneur. We’re moving in that direction,’ he said.”

• And yet: “Many of the startups that use Shopify’s services are more likely to fail than grow meaningfully, said Robert Fairlie, an economics professor at the University of California, Santa Cruz. ‘How can you get capital, and how do you scale up in this kind of environment and this kind of uncertainty?’ he said.” READ MORE

Amazon has bought an Australia-based Shopify competitor: “Amazon, which initially dismissed Shopify’s rise, began to zero in on the company over the past year, people familiar with the matter said. Amazon learned that many sellers had been defecting to the Canadian firm because of Amazon’s increasing cut. Its seller fees can on average amount to roughly 30 percent of each sale on its platform from outside vendors, up from 19 percent five years ago, according to the Institute for Local Self-Reliance. Shopify collects 2.9 percent plus 30 cents on a transaction.”

• “Founded in 2013, Selz serves as an online platform that helps small and medium-size companies launch and maintain their online businesses. The private company employs more than 30 people, according to data firm PitchBook.” READ MORE

Web sites are selling fake Amazon reviews in bulk to third-party merchants, according to a UK consumer rights group: “One site was selling reviews for about $18 each and said it could help Amazon sellers achieve the coveted Amazon's Choice status within just two weeks. Another claimed to sell contact and social-media details for Amazon reviewers. Some sites asked for free or discounted products in exchange for reviews. These practices are against Amazon's guidelines, which prohibits sellers from paying third parties for reviews.”

• “Groups selling Amazon reviews have also popped up on social-media sites such as Facebook and Telegram.”

• “One site offered 1,000 reviews for $11,000.” READ MORE

RETAIL

Century 21 is trying to make a comeback (in South Korea): “Century 21 Department Stores went bankrupt last year and liquidated all of its stores. During the bankruptcy process, the Gindi family, which owned, operated and founded the famous off-price chain, bought back the intellectual property in November for $9 million, together with a silent partner. The Gindis are developing a strategy to resurrect the off-pricer, which always presented an assortment that, compared to other off-pricers, skewed higher in luxury, had many European labels, and deeper breadth — and consistently drew big crowds of bargain hunters. Typically, Century 21 offered discounts from 40 to 65 percent off, and up to 90 percent off on clearance. At its peak, it was a $700 million business.”

• “‘Last year was particularly devastating for many people around the world, and extremely hard for us, as a family business. My dad and his partner started Century 21 60 years ago. We really thought we would get through the year, but it kind of all happened kind of quickly,’ said Raymond Gindi, co-chief executive officer of Century 21 ...”

• “The executives said after Korea, the next growth move could be to restart ecommerce, and within a month, Century 21 will be active again on social media.” READ MORE

LITIGATION

Herb Washington, a former baseball player who built McDonald’s largest Black-owned franchise operation is suing the company: “Washington, 69, owned 27 McDonald’s restaurants in New York, Ohio and Pennsylvania during his four decades as a franchisee but alleged that the company began a campaign to drive him out in 2017 in retaliation for speaking about the ‘predatory, racially biased steering practices’ againstBlack franchisees. Today he owns 14 McDonald’s restaurants, he said, having been forced to sell seven stores in the last three years alone to White owners.”

• “‘McDonald’s has targeted me for extinction,’ Washington said during a Zoom press conference from his home ...”

• “Washington’s lawsuit comes amid an alarming exit of Black franchisees from McDonald’s and widespread allegations of racial bias. Last fall 52 Black former franchise owners sued McDonald’s for setting them up to fail despite the company’s public commitment to racial equity.”

• “McDonald’s responded to the lawsuit Tuesday by blaming Washington for his business challenges.” READ MORE

OPPORTUNITIES

Cambridge Typewriter, the only typewriter shop in Boston, finds there are riches to be found even in very old niches: “Why typewriters? Indoor solitary crafts and hobbies have all been boosted by the pandemic’s strictures. But, just like the little revival typewriters enjoyed back in the aughts — initially a West Coast hipster enthusiasm — the current increase points to an affection for the mechanical amid a digital age. The ‘typer’ has hardly replaced the ubiquitous laptop. How could it? With only a few insignificant exceptions, the machines have not been mass-produced for several decades. But a transformation was taking place: the device once considered the essential business machine was reborn as a creative tool far removed from the drudgery of work. The typewriter has acquired a touch of magic.”

• “‘My customers use it for journaling, poetry, creative writing,’ [owner Tom] Furrier said. ‘It’s all about writing without Internet distractions, about getting into a zone. It’s a Zen thing.’”

• “‘I was busy beforehand, but COVID raised my business by 40 percent.’” READ MORE

THE 21 HATS PODCAST

Episode 49: How Do We Get Out of This Cage? This week, Karen Clark Cole, William Vanderbloemen, and Laura Zander cover a lot of ground: For one thing, what do you do when the to-do list seems endless, you’re already working 24/7, and you just can’t get ahead? For another, what do you do when employees decide they want to work remotely from random parts of the country? Does that work? Is it a bureaucratic nightmare? Meanwhile, Laura is confronting several big, interrelated issues. Her co-founder and husband, Doug, is ready to step back from the business. That’s a little tricky because the company operates off a 19-year-old platform that Doug built, and only he knows how to make it work. They’ve been trying to hire tech people for Doug to train, but they’ve been through 15 people in 10 years—and they know they’re doing something wrong. Do they need to hire a recruiter? Is it time to junk Doug’s platform and go with Shopify? If they do that, will they forfeit 19 years of SEO value? All of which has left Laura feeling trapped. “That’s this cage that we’re in,” she tells us. “What the hell do you do?”

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• If you have a question for the regulars on the 21 Hats Podcast—it can be about their businesses or about yours—send it to me by replying to this email. We’d love to hear from you!