By Blake Hutchison, CEO, Flippa
2022 has been a tough year for publicly traded tech companies, with former high-flyers like Meta losing 70% of their value. Are investors starting to second-guess the visionary stories of tech leaders? What are the broader lessons for the future of digital entrepreneurship? Is digital still worth investing in amidst such a volatile economic climate?
If you look beyond Wall Street and Silicon Valley, there is a more complex – and hopeful – story to tell about digital entrepreneurship and investing in digital businesses. No matter what happens next with the stock prices of Big Tech companies, there is a strong and growing ecosystem of online small businesses and digital asset investors that are making real money and creating a powerful foundation for the next stage of the digital economy.
Let’s take a closer look at a few big lessons that digital entrepreneurs can learn from this unique moment.
- Digital Businesses Will Continue Growing Beyond the Pandemic
During the pandemic, the U.S. saw significant growth in the formation of new business entities, as millions of Americans started a business from home or got started with a side hustle to make extra money.
Between 2019 and 2020, the National Bureau of Economic Research recorded a 20% increase in applications for new Employer Identification Numbers (EINs). This data included a 1.3 million increase in new business applications for “non-employers” (solo entrepreneurs), and an increase of 500,000 in “likely employers” (businesses likely to hire employees) between March 2020-May 2021, compared to March 2018-May 2019. One-third of this growth in new businesses was in the Non-Store Retail category – such as online businesses and eCommerce.
There are powerful signs of enduring momentum for online shopping and mobile commerce. People’s smartphones and mobile app usage is still the driving force of everyday life. Last year, people spent an average of 100 hours per month on mobile apps, with a total of 32 billion app downloads. According to Statista research projections, by 2025, 10% of total U.S. retail sales will come from mobile commerce.
Innovative eCommerce entrepreneurs are still developing exciting, effective ways to sell more products and services to customers via digital channels. The leaders of the future might not be the entrenched Big Tech incumbents of today – there is still a lot of room for disruption and growth in this space.
- Small Online Businesses Will Be the Next Highly Profitable Digital Assets
Some of the biggest carnage in the world of publicly traded tech companies has been suffered among the share prices of unprofitable companies – companies that were not yet in the black financially, but which were selling a compelling story about their future growth prospects. With interest rates rising, investors can get a better return on their investment without having to buy into a lot of hype.
But here’s the thing about so many digital businesses that are privately held: there are many small online businesses that are small, but profitable! Thousands of digital entrepreneurs have identified successful business models and profitable markets to serve. Not every company is going to be the next Amazon or a Silicon Valley unicorn – and that’s OK!
There is strong, growing demand from investors who want to buy into small-but-profitable online businesses and digital assets. These investors are seeing strong potential for investing in small online businesses (defined as annual revenues of under $500K-$50MM) with demonstrated profitability.
Small online businesses like eCommerce retailers, revenue-generating websites, and other digital assets have quietly been delivering profitable growth to their owners and investors. Instead of requiring investors to buy into short-term hype about the next big thing, this is a different vision of the future of digital entrepreneurship: a long-term approach, based on a strong foundation of lots of “little” (but profitable) businesses.
- DEI Will Reign King
Diversity, Equity & Inclusion (DEI) has been top of mind for hiring managers and philanthropists during the past few years, but one of the biggest untapped forces for DEI is digital entrepreneurship. 40% of businesses in the U.S. are women-owned, and their companies generate $1.8 trillion per year. Digital entrepreneurship can unlock another level of opportunity for people who might have been discriminated against or undervalued in a traditional corporate career. Digital businesses can help unleash creativity and innovation from a new generation of ever-more-diverse entrepreneurs.
Bottom line: the future is bright for digital businesses – even if there is short-term pain happening on the NASDAQ. Small online businesses are making real money and creating new ways to sell goods and services and open up human potential via phone screens. Even if Big Tech takes a hit in the short run, the long-term future of digital is going to be bigger than ever – even if it comes in a small package.