The Covid Startup Boom is Still Booming

Some 30 percent of new entrepreneurs last year were unemployed when they started their businesses.

Good morning!

Here are today’s highlights:

  • The SBA’s PPP forgiveness portal is seeing a surge.

  • Do you need to hire a head of remote?

  • And did George Clooney ruin Mexico’s tequila industry?

STARTUPS

The startup boom is growing stronger: “Americans filed paperwork to start 4.3 million businesses last year, according to data from the Census Bureau, a 24 percent increase from the year before and by far the most in the decade and a half that the government has kept track. Applications are on a pace to be even higher this year. The surge is a striking and unexpected turnaround after a 40-year decline in U.S. entrepreneurship.”

  • “The prolonged decline worried economists, because start-ups are a key source of job growth, innovation, and economic resiliency.”

  • “Early evidence suggests the increase in start-ups has been strongest outside the big-city downtowns that have been hit hard by the exodus of office workers.”

  • “Researchers at the Kauffman Foundation found that about 30 percent of new entrepreneurs last year were unemployed when they started their businesses, roughly double the pre-pandemic rate.”

  • “‘It seemed like there was no better time because the world was so uncertain,’ he said. ‘Covid kind of gave permission to throw caution to the wind.’” READ MORE

There’s a new generation of resale startups looking to fill in the gaps not already dominated by category giants like The RealReal, Poshmark and StockX: “Queenly, where shoppers can find gently used prom dresses and other formalwear, raised $6.3 million in a July funding round led by Andreessen Horowitz. Requipper, a resale site that sells used outdoors gear and apparel also recently raised funding from Ulu Ventures and Aliavia Ventures. Secondhand watch marketplace Chrono24 recently raised about $117 million in funding from investors including Aglaé Ventures, the family investment firm from LVMH’s Bernard Arnault.”

  • Much like the new crop of online marketplaces specialising in Black-owned brands or products from direct-to-consumer start-ups, many niche resale sites pitch themselves as an antidote to e-commerce sites that stock tens of thousands of items.”

  • “They’re counting on shoppers getting fed up with sifting through an endless online garage sale.” READ MORE

Several startups are offering phones that aren’t all that smart: “A new device is slated to arrive in November: the Mudita Pure, a cellphone that can barely do anything—at least, compared with contemporary smartphones. It can make calls and send texts, but it cannot access social media, take photos or send email. The phone will cost around $369, and its monochrome screen won’t even load up a grid of Sudoku. But that, the company says, is the point.”

  • “Their products may be simple, but their business plans are not. Minimalist phone companies must keep costs competitive without access to the economies of scale enjoyed by bigger companies, their founders say.”

  • “The screens of several minimalist phones, including Brooklyn, N.Y.-based Light Phone Inc., use black and white e-ink to avoid the stimulating blue light and colors used by smartphones, said Kaiwei Tang, Light Phone’s co-founder and CEO.”

  • “‘If I were an investor and somebody pitched me a minimalist phone, I’d be pretty cautious,’ [said Ken Hyers, director of emerging technology devices at Strategy Analytics Inc.].” READ MORE

FINANCE

The SBA’s PPP forgiveness portal is experiencing a surge: “More than 340,000 small business owners submitted applications to the Small Business Administration’s Paycheck Protection Program loan forgiveness portal in the two weeks it has been open — but some of the largest lenders are sticking with their own processes. The number of lenders that have opted in to use the portal continues to grow, reaching 1,230 as of August 11.”

  • “The portal allows small-business owners with loans of $150,000 or less to apply for forgiveness directly with the SBA.”

  • “Chris Hurn, CEO and founder of nonbank lender Fountainhead, said SBA’s portal rollout had gone well.”

  • “It makes it very simple for us as a lender to quickly submit in a very fast fashion,’  Hurn said. ‘I think it's a little more streamlined for the borrowers. It's a lot more streamlined for the lenders.’” READ MORE

RETAIL

After helping to destroy department stores, Amazon is opening department stores: “Some of the first Amazon department stores are expected to be located in Ohio and California, the people said. The new retail spaces will be around 30,000 square feet, smaller than most department stores, which typically occupy about 100,000 square feet, and will offer items from top consumer brands. The Amazon stores will dwarf many of the company’s other physical retail spaces and will have a footprint similar to scaled-down formats that Bloomingdale’s, Nordstrom, and other department-store chains have begun opening, the people said.”

  • “It is unclear what brands Amazon will offer in the stores, although the company’s private-label goods are expected to feature prominently ...”

  • “Amazon sells scores of products, including clothes, furniture, batteries and electronic devices through many of its own labels. The plans aren’t yet final and could change, these people said.”

  • “Amazon’s plans represent an evolution in the company’s efforts to move into bricks-and-mortar retail after years of taking market share from big-box operators—moves that helped to push many into bankruptcy.” READ MORE

HUMAN RESOURCES

Do you need to hire a head of remote? “Darren Murph is the head of remote at GitLab and is said to have pioneered the role. He has been leading remote work at the company since 2019, though the software developer has been fully remote since 2015. As an open-source company, GitLab has treated its head of remote role much like it does its products — by openly sharing its learnings, inner workings and guides for others to plug into their own organizations.”

  • “When I joined, my mission was to create the world's most comprehensive library on proven principles of remote work.”

  • “A head of remote pressure-tests the entire organizational design to make sure that all culture and workflow operates well in a location-agnostic way.”

  • “I've frequently said, the past 18 months have not been remote work, they've been Covid-induced work from home.” READ MORE

SMALL BUSINESS TECHNOLOGY

Most businesses are run on out-of-date software suites: Their systems no longer fit the demands of a work-from-anywhere world. Even worse, they are not well integrated, causing extra work for employees who spend long hours, often on personal time, toggling between programs to support what should be simple business processes.”

  • “Workers told us that they routinely keep as many as eight screens or windows open at once to capture and source the data needed to do their jobs in sales, marketing, and service.”

  • “When we asked them to compare the onerousness of using their software with other less-than-pleasant activities such as waiting in line at the DMV, jury duty, arguing with their significant others, or even cleaning the bathroom, an aggregate 66 percent preferred any of those activities over using their front office systems.” READ MORE

LOGISTICS

Here’s how a student project turned into Stord, which may revolutionize the global supply chain: “That Georgia Tech student was named Sean Henry. And what he outlined that day in 2016 was the concept behind Stord: a cloud-based distributed logistics platform designed to connect companies in real time to the hundreds of thousands of nodes that constitute the nation's supply chain. ... With his co-founder and CTO, Jacob Boudreau, what Henry envisioned [was] a single distributed network that would allow customers of all sizes to shape-shift, to expand or contract their warehouses on demand ...”

  • “As the pandemic has unfolded, traditional retailers have been forced to accelerate their shift to e-commerce. That's easy to do on the order-taking side but not on the fulfillment side.”

  • “‘These companies are configured for truckloads,’ says Henry. ‘Pallet in, pallet out. Now the problem is: How do I reach end customers versus a truckload to a partner once a week?’”

  • “Most companies don't have the capital, or desire, to build out their own multichannel distribution systems. ‘That's where we come in,’ says Boudreau.” READ MORE

THE COVID ECONOMY

Travelers are canceling trips again: “After a rebound in travel this summer, people are once again canceling plans for trips because of the surging number of Covid cases. In a recent survey, 27 percent of respondents said they postponed a trip and more than 54 percent said the Delta variant has made them less interested in traveling right now. ... Economist Adit Damodaran with the travel app Hopper says summer flight demand has flattened from pandemic highs, which is leading to lower prices. ‘Airfare is on the downtrend,’ Damodaran said.”

  • “But his service is finding—since July—one aspect of travel is up. There's been a 33-percent increase in people buying cancelable tickets.” READ MORE

OPPORTUNITIES

In 2017, when George Clooney announced he was selling his five-year-old tequila brand for $1 billion, it unleashed a wave of celebrity tequila: “The factory that makes Michael Jordan’s brand sits along a busy highway on the outskirts of Tequila, where the city gives way to rolling fields of silver-toned agave. Celia Maestri was a Mexican American spirits importer in Houston when she bought the distillery with her husband in 2008. Their business, Casa Maestri, was still in its infancy when Clooney sold. That same day, their phones started ringing. Caller after caller wanted to know if the distillery could help them make their own tequila label. Today, the factory produces nearly 150 brands — more than any other distillery in Mexico.”

  • “‘We are dream-makers,’ said Maestri, whose sprawling industrial facility now includes a luxurious lounge where clients can choose from a selection of hundreds of bottles, stoppers and labels.”

  • “The company has produced tequila for an array of international stars — including Elon Musk, rapper E-40, actress Shay Mitchell and Third Eye Blind frontman Steven Jenkins.”

  • “But not everybody is happy with the industry’s rapid growth, which carries both an environmental price — as farmers bulldoze forests to plant more agave — and a cultural one — with foreigners playing an ever-growing role in one of Mexico’s proudest cultural traditions.”

  • “‘Personally I find it very sad when thousands of years of history are reduced to a marketing campaign from a very famous individual,’ said David Suro-Piñera, a conservationist who owns the small tequila label Siembra Azul.” READ MORE

THE 21 HATS PODCAST

Episode 73: Get Rid of the Arsonists: This week, we have a very special episode. It’s the dog days of August, and the only regular available was Jay Goltz. So we reached out to a bunch of loyal listeners who we happen to know have listened to every episode of this podcast, and we asked them if there was more they wanted to know about Jay—or if they’d heard enough. It turned out, they had some great questions, including: What did Jay think of Dana’s “Jay” iImpression? What exactly does Jay do all day? How did he learn to delegate? How does he know when it’s time to fire someone? And which of the other 21 Hats Podcast businesses would he invest in?

If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren