About two years ago, we started hearing the first news of an unknown virus. Before most of us grasped the magnitude of the impact it would have on our lives, the world rapidly precipitated into a “global lockdown.” Countries have since been trying to manage the effects of the pandemic, and while we now have a better understanding and some important tools, we don’t seem to be close to the finish line.

Along with dangers to health, this pandemic has brought unprecedented shocks to economies around the world. A critical segment of economies that we might have expected to be especially hard-hit is entrepreneurship. If at the onset we were to make a prediction about how this crisis would affect entrepreneurs, we’d probably be quite pessimistic.

Some early evidence by Alexander Bartik of the University of Illinois at Urbana-Champaign and colleagues showed the magnitude of the crisis’s effect on small businesses at the start. As the pandemic emerged, small businesses were often forced to reduce their workforce or completely terminate operations. As the study finds, many were financially “fragile” and had liquidity to support themselves for no more than just a few weeks.

Naturally, fully understanding the impact and nature of the change brought about by this shock will take some time. But, at least according to some of the signals we have now, the picture is less dark than many would have expected. We now have a more nuanced view, suggesting that this crisis has thus far been fundamentally distinct from the Great Recession and other recent economic disasters.

Some entrepreneurs were able to react quickly and pivot, transforming this crisis into an opportunity.

During the emergence of the pandemic, there was a substantial drop in the number of new businesses created. However, the rebound was strong and unexpectedly rapid. In a study analyzing data through May of this year, John Haltiwanger of the University of Maryland found that, in the U.S., “the pace of applications since mid-2020 [was] the highest on record.” At the same time, the rebound was uneven across industries, and especially strong in some of the industries that suffered most from the first wave of lockdowns.

In economic crises, access to funding is often a key challenge for early-stage businesses. An important source of funding for high-growth, technology-oriented entrepreneurship is venture capital. Harvard Business School’s Paul Gompers and colleagues published a survey of the venture capital community in September 2020 and found that most investors expected to invest substantially less in the following year. We only have some initial (and maybe not-too-systematic) evidence at this point, but that prediction seems to have not really held true. Venture capital investment exploded around the world following the early months of the crisis and, according to Crunchbase, especially during the past year.

Rather than slowing down, venture funding changed direction. Research published in late 2020 by Andrea Bellucci of the Charles III University of Madrid and colleagues shows that venture capital investing around the world started to move “towards pandemic-related deals.” In other words, they found investment going into spaces that might gain from the transformation the pandemic is bringing about in the world.

This is consistent with the idea of a broader “refocusing” of innovation. A lot of firms quickly pivoted to work on technologies that support trends that are now driving our future, such as working from home. Stanford Graduate School of Business’s Nicholas Bloom and colleagues found that, in the U.S., “the share of new patent applications that advance [work-from-home] technologies more than double[d] from January to September of 2020, greatly surpassing its previous peak and following an upward trajectory since the onset of the pandemic.”

Ultimately, the pandemic made life harder for entrepreneurs around the world. Especially those with limited financial support struggled to navigate the uncertainty of the past two years. However, some entrepreneurs were able to react quickly and pivot, transforming this crisis into an opportunity. Whether this partial optimism is purely transitory or more “structural” remains to be seen, but this phenomenon might certainly have some important lessons for the entrepreneurial community.


Andrea Contigiani G12 GRW16 GRW19 is an assistant professor at the Fisher College of Business at Ohio State University, where he specializes in quantitative research on entrepreneurship.