Small Business Labs

We're Nearing Peak Fossil Fuel Demand

McKinsey's Global Energy Perspective 2021 suggests the global demand for fossil fuels will peak in 2027 and steadily fall afterwards.  

As McKinsey's report chart below shows (click to enlarge), global coal demand peaked in 2014 and they are projecting oil demand to peak in 2029, and natural gas demand peaking in 2037.

Other forecasts are even more aggressive.  A recent report by the International Energy Agency suggests oil supply and gasoline demand may have already peaked.  Key quote from their report:

 "Gasoline demand is unlikely to return to 2019 levels, as efficiency gains and the shift to electric vehicles eclipse robust mobility growth in the developing world." 

The drivers of these changes, of course, are the steady declines in the cost of renewable energy sources and their increased use.

As forecasters we're fascinated that the term "peak oil" now refers to the point in time when global oil demand begins to fall.

It wasn't that long ago when "peak oil" was used to describe the point in time when oil supplies started running out. 

There were even a bunch of forecasts in the 2000's suggesting a lack of oil would lead to the collapse of modern civilization, with many suggesting the collapse would happen by 2020 - or even earlier.  

Instead of running out of oil, it's now likely vast amounts will end up staying in the ground.  

The last issue keeping renewables from fully replacing fossil fuels is storage.  But that's quickly changing.

Large battery storage systems are coming down in price and "green hydrogen" systems are becoming viable.  

So expect to see the declines in the use of fossil fuels continue - and maybe fall even faster than McKinsey estimates.  

The Legal and Tax Complications Faced by Digital Nomads and Their Employers

Thanks to the pandemic, employers and employees have both embraced the advantages of remote work. 

Even IBM, which got a lot of attention several years ago when it ended its remote work programs, is now embracing remote work.

But the surge in remote work has spotlighted a potential set of problems for both remote workers and their employers. 

It turns out that U.S. labor and tax laws are not designed for, or very accommodating to, remote work.  

Recode's Did you work remotely last year? A surprise tax might be waiting for you nicely covers the various tax issues workers face when they live work remotely. 

A quick summary of the article is if you're working remotely, it can be pretty complicated and potentially expensive from a tax perspective.

But remote work is even more legally challenging for employers.

The large corporate labor and employment law firm Littler recently released its first Global Transformation Initiative report (warning - it's long and written by lawyers for lawyers).  

The report covers the various ways "wandering workers" - Littler's term for remote workers - can get their employers into legal trouble. 

Key quote from the report's landing page:

The Wandering Worker phenomenon raises a host of employment considerations:

• Recruiting, hiring, onboarding, managing, and firing employees is going virtual.
• Employment taxes and withholding become increasingly complex when the employer and Wandering Worker do not work in the same location.
• Determining which state and local benefits apply is particularly tricky.
• Employers are struggling to implement systems for tracking and compensating working and travel time for non-exempt employees, among other wage and hour concerns.
• Privacy and data security issues emerge, particularly as the trend towards global workforces accelerates.
• Union organizing is rapidly adapting to the new work regime.

In all these areas, there are potential legal landmines remote workers could easily trigger that would create legal problems for their employer.

Our work with MBO Partners has found that the number of digital nomads substantially grew in 2020 as more workers found themselves untethered from the office due to the pandemic.

As the MBO Partners report chart below shows, this growth was mostly driven by digital nomads with traditional jobs.  

We expect these numbers to grow again in 2021.  

As Littler points out, digital nomads expose their employers to tax and legal risk, with traditional employee digital nomads being much riskier for their employer than digital nomads who are independent workers.  

But all digital nomads and those employing them need to be aware of these issues.  

JungleScout's State of the Amazon Seller

JungleScout provides a platform that helps small businesses find, launch, and sell products on Amazon.  They recently released their 2021 State of the Amazon Seller Report.

This report covers who Amazon's small business sellers are, what and how they’re selling, how they are responding to the pandemic induced increase in ecommerce and their future plans.

Amazon has about 2.4 million active global sellers on their platform and they generate roughly $208 billion in revenue, which is about 54% of Amazon's total revenue.  Of the 2.4 million sellers, almost half (49%) are based in the U.S.

And according to the report, most sellers (73%) are solopreneurs.  Only 27% report having one or more traditional employees.  

Also interesting is 36% of sellers report having a full-time job in addition to their Amazon activities.  In other words, over one-third of small business sellers selling on Amazon are side giggers.

Over half of the sellers report selling their goods on other platforms (eBay, Etsy, etc.), in stores, or on their own ecommerce site.

We found the data on how they plan to expand quite interesting.  

As the report chart below shows, Walmart is the top platform they plan to expand to.

   

Roughly 1 in 5 (21%) also reported they plan to start their own ecommerce site.  

Having a proprietary ecommerce site and not being beholden to the large platform companies is an increasingly popular option.  

This is one reason why Shopify has become so successful.

Shopify gives merchants access to services such as payments and fulfillment, but lets them maintain more control of their branding and customer relationships.  Shopify's fees are also generally lower than Amazon's.

Having your own site is too valuable not to do it - if you can make it work.  And increasingly, small businesses are making it work.

The Demographics of Nonemployer Business Owners

The U.S. Census has released new demographic data on nonemployer businesses.  

Nonemployers are businesses that have an owner but don't have paid traditional full or part-time employees (W2 employees). The data comes from tax records, and you can think of nonemployers as solopreneur businesses (freelancers, independent contractors. gig workers, etc.)

The new data provides information by owner demographics such as sex, race, ethnicity and veteran status, geography, industry, receipt size class, and legal form of organization.

The Census chart below (click to enlarge) illustrates some of the demographics of nonemployers for 2017.  Census is planning on updating this for 2018 (the most recent year the non-demographic data is available) in the near future.

The nonemployer dataset gets less attention than other government data on self-employment. There have been two reasons for this.

The first is until fairly recently, there was little interest in self-employment data.  The rise of the gig economy has changed this.

And second, the nonemployer dataset is messy and includes a hodgepodge of business entities - passive businesses, firms no longer in business, LLCs owned by major corporations, etc. - that aren't active solopreneur businesses. 

But despite these issues, we find the nonemployer data to be a useful indicator of the overall size and growth - and now, also the demographics - of U.S. self-employment.  

Because this dataset is getting more attention, the Census is working to make it more complete and timely.  The addition of demographic data is an example of these efforts. 

Recode's 10 ways office work will never be the same

At around 4,000 words, Recode's 10 ways office work will never be the same is really more of a report than an article.

The article is chocked full of data and links to interesting studies illustrating what offices will be like post-pandemic. 

The 10 ways office work is changing covered in the article are:

1. Working from home is here to stay
2. Flexibility is a double-edged sword
3. Some populations will benefit from working from home while others struggle
4. The office will still exist, but you’ll use it differently
5. Expect more AI, automation, and freelancers
6. Our communication will be more asynchronous
7. How our productivity is measured will change
8. Culture will be harder to create
9. We’re more human at work
10. More of your colleagues will live somewhere else

Two of 10 jumped out at us. 

#3, some benefiting from remote work while others struggle is something we see all the time in our work.  Hopefully hybrid models will fix this for many who struggle.

#7,We've long thought our standard productivity measures don't capture knowledge work properly.  The shift to hybrid models will likely lead to new, more effective measures.

If an analyst or consulting firm produced this report, it would cost thousands of dollars.  It also wouldn't be as well written.  

Since Recode is free, we recommend that anyone interested in the topics above read the article.

Spending on Pets and Investing in Pet Startups Continues to Grow

U.S. spending on pets reached nearly $100 billion in 2020, up from $95.7 billion in 2019, according to the American Pet Products Association.  

And according to Crunchbase News bad pet pun infused article Pets Became Purrfect Pals During Pandemic While Startup Funding Didn’t Lay Down, 55 pet startups raised $281 million in venture funding in 2020 (chart below).

Pet startups now even have their own venture accelerator programs.

Leap Venture Studios, for example, is a partnership between Michelson Found Animals and Kinship, a division of Mars Petcare. 

Leap, which started in 2018, provides training, seed investments and other support to pet startups.  

Regular readers know the pet humanization trend is driving the growth of the pet industry.  

BTW, in case you were wondering, 63.4 million U.S. households own dogs. This is roughly half of all U.S. households (there are about 128 million U.S. households). Cats live at 42.7 million U.S. households (no one really owns a cat). Fish come in third, with about 14 million households owning them.

See our Pet Trends section for more pet humanization and the pet foods industry.

Side Gigs for Restaurants

The New York Times article You’ve Heard of Ghost Kitchens. Meet the Ghost Franchises covers the growing number of companies franchising food concepts to existing restaurants.

The restaurants that take on these franchises continue to serve their regular food and make the franchise food for delivery only.

Key quote from the NYT article on the burger franchise MrBeast Burger, which takes its name from the well-known celebrity YouTube star MrBeast:

MrBeast Burger is not quite what most of us think of as a chain, or even a restaurant. In exchange for a cut of sales revenue, the brand supplies the name, logo, menu, recipes and publicity images to any restaurant owner with the space and staff to make burgers as a side hustle. When a customer orders from the MrBeast Burger in Midvale, Utah, the food is prepared at a location of the red-sauce chain Buca di Beppo, following a standardized MrBeast recipe.

And yes, we've never heard of MrBeast.

And after looking at his videos, we don't get why he's a star. 

But his burger target market (teenagers and young adults) loves his videos. So they buy his burgers.  

Or we should say they buy the burgers from the franchise company, Virtual Dining Concepts. 

MrBeast's contribution is his name and his promotional activity.

Virtual Dining Concepts has 9 different restaurant concepts, including, of course, MrBeast Burger.  

The franchise fees are not cheap.  Most ghost franchises charge 35%-45% of sales.

But in most cases, the fees include delivery charges, which can be as high as 30%.

The franchising companies also spend a lot of money getting good placements on the delivery apps and search engines.  This is something a small restaurant chain would be unlikely to accomplish on its own.

Ghost kitchens have been around for several years and the pandemic has accelerated their growth.  

Since food delivery will likely continue to grow post pandemic, we expect ghost franchises to continue to grow.

Uber Grants U.K. Drivers "Worker" - But Not Employee - Status

After losing a U.K. Supreme Court case, Uber this week announced it would be classifying its U.K. drivers as "workers." This means Uber's 70,000 UK drivers will get a minimum hourly wage, holiday pay, pensions and other benefits. 

Unlike the U.S., which has two worker legal classifications - self-employed and employee - the U.K. has three.  

The "worker" classification is the 3rd, and "workers" get some, but not all, of the protections and benefits employees in the U.K. receive. 

Because of this, the "worker" classification has been described as "a half-way house between being an employee and self-employed."

Despite this move by Uber, its U.K. legal battles are not over.

Uber is applying the minimum wage requirement "after accepting a trip request and after expenses." Uber refers to this as "engaged time" and is not applying the minimum wage to the time a driver waits for a ride. 

Not including wait time in the minimum wage payment is a contentious issue. 

Uber argues that since many drivers drive for multiple services, they shouldn't pay for wait time. Worker rights groups argue they should.

So it's likely the U.K. courts will have to decide this issue.

We've been against a 3rd way to classify workers in the U.S.  

But as we pointed out in our article A Third Way to Classify Workers Gains Momentum, we've changed our minds.  This is because California's AB5 legislation and the many classification lawsuits have shown that trying to fit gig work into our current laws doesn't work.

So we now think adding a 3rd way to classify workers is the best way to move forward.

Whatnot - A Live Streaming Person-to-Person Collectibles Marketplace

Whatnot, which bills itself as the best marketplace for collectors and enthusiasts on the internet, recently raised a $20 million funding round led by A list VC Andreessen Horowitz.

According to TechCrunch's Whatnot raises $20M for its livestreaming platform built for selling Pokémon cards and other collectibles:

"The company currently focuses primarily on Pokémon cards, Funko Pops, FigPins and sports cards, but they mention things like comic books, video games and vintage hardware as natural fits."

And yes, we have no idea what "Funko Pops" or "FigPins" are, but they must be collectible.

The company says the online marketplace targets person-to-person commerce.  Key quote from one of their press releases:

Instead of focusing on the retailer-to-consumer relationship, Whatnot builds peer-to-peer connections within existing communities, driving high adoption and conversion. While some sellers on Whatnot are small businesses, 90+% of Whatnot sellers are enthusiasts who buy and sell their favorite items as a hobby or side-hustle.

In addition to a traditional online marketplace, Whatnot also offers livestreaming.  

 

Think of it as the TV shopping network meets the iPhone, with the video coming from people at home streaming their sales pitches for their collectibles.  

There's been a surge in interest in collectibles since the beginning of the pandemic.  While this surge will likely subside once the pandemic is over, the collectibles market is large and will continue to grow.

Whatnot is yet another example of an online marketplace helping people turn their interests and passions into side businesses.

eBay also started as a person-to-person marketplace but evolved into a site dominated by businesses.  It will be interesting to see how Whatnot evolves.  

American Express on The Rise of the Digital Nomad

American Express recently released its annual Global Travel Trends report.  

And not surprisingly, one of their trends was on digital nomads.  Key quote from the report:

"... 54% of respondents (U.S.) said that the freedom and flexibility of being able to live and work while traveling the globe is more appealing now than it was prior to the pandemic."

The AMEX chart below (click to enlarge) shows the interest in being a digital nomad by country.

 

As we pointed out in our article The Wannabe Digital Nomads, most people saying they're interested in becoming a digital nomad won't do it.  

In our work, we've learned surveys asking aspiration questions or questions on hot topics or things that sound like fun result in a large number of false positives.  And survey questions about becoming a digital nomad are a good example.  

Instead of becoming nomadic, most of the 54% who said they are interested will follow digital nomads on social media and treat the trend almost as a spectator sport. We call this group "armchair digital nomads".  

But having so many say they would consider it shows there's strong interest in digital nomadism.  And that interest is playing out in the numbers. 

According to the MBO Partners 2020 research brief COVID-19 and the Rise of the Digital Nomad, the number of U.S. digital nomads grew from 7.3 million in 2019 to 10.9 million in 2020, a 49% increase.

So we've definitely seen an uptick in digital nomadism since the beginning of the pandemic. 

See the digital nomad research brief for more details.  

NFTs are Helping to Monetize the Creator Economy

The Creator Economy - the economic activity generated by the people who create online digital content and the firms that serve them - is a hot topic in tech circles. 

And one of the hottest creator economy topics is NFTs.  These are non-fungible tokens.  

The reason they're hot is they provide a way to make money selling digital content.

In simple terms, an NFT is used to prove the ownership and uniqueness of a digital item.

NFTs are tokens (digital code) that are attached to digital assets and content.  The tokens use blockchain technology, which provides the ability to track the content's origin and current ownership.

This means the objects an NFT is attached to can be bought and sold.

For example, a digital art piece recently sold for $6.6 million on an online art marketplace.       

And the art auction house Christie's is currently running an auction to sell a digital art piece (pictured) by the artist known as Beeple. 

Current bidding is over $3 million.  **Update: Beeple's digital art piece sold for a stunning $69 million after a frenzy of last minute bids.**

Another example is sports video highlights.  A film clip of a Lebron James dunk recently sold for over $200,000. 

You may be asking why anyone would want to own digital content that can be freely downloaded from the Internet.  

Key quote on this from TechCrunch's The Explosive Potential of NFTs in the Creative World:

“Humans inherently, whether we will like to admit it or not, want to own things,” Ronin said. “And I think that that’s part of the human experience is owning things. When you own things, it’s a connection, and it’s like you have a reason for being and there’s something unique about ownership ...”

Supporting this is the fact that people are willing to pay astronomical sums of money for physical works of art when free or cheap copies are easily available.

So on some level, it makes sense that people are willing to pay to own original digital content.

The challenges of earning money in the creator economy is another hot topic.  This is because while some creators (the vast majority are independent workers) make a lot of money, most make very little. 

The hope is NFTs will allow more people to monetize their digital assets. 

Barlow Research on Small Business Exporters

Barlow Research is one of our go-to sources on all things related to small business use of financial services.

Their article Five Truths about International Business in the Middle Market covers survey research on the exporting and importing by U.S. firms with between $10 million and $500 million in sales (midmarket companies).

As shown in the Barlow chart below (click to enlarge), the key finding is that about one-third of firms in this size category conduct business internationally.

As we pointed out in a previous article, about 28% of microbusinesses - firms with fewer than 4 employees including the owner  - conduct business internationally.  

Barlow doesn't include historical data in their article.  But microbusiness exports have risen rapidly over the past decade, with the share of microbusiness exporters doubling.  

This is primarily due to online marketplaces like Amazon and Etsy, and improvements in outsourced logistics services.  

One of the most interesting parts of the Barlow article are the export challenges faced by midmarket companies.

What's so interesting to us is microbusinesses report fewer challenges than midmarket firms do.  

Shipping is still an issue, as is regulation.  But none of the other challenges reported by midmarket companies even blip with microbusinesses.

This is likely because they outsource most tasks to online marketplaces and logistics firms, while most midmarket exporters sell directly into foreign markets.

Historically, one of the huge advantages larger firms have had over smaller firms is the operational scale to export.  

Thanks to online marketplaces and other services, that advantage has clearly narrowed.

More research needs to be done on this topic and we're adding this to our "to-do" list.

LinkedIn's New Online Freelance Talent Marketplace

Fortune's LinkedIn’s new Marketplaces will help freelancers find work covers a new online freelance talent marketplace being developed by LinkedIn.

Like other online freelance talent marketplaces such as Fiverr and Upwork, Marketplaces will enable businesses to find, hire, and pay freelancers.

According to the article:

Marketplaces, which is supposed to launch in September, will focus on white-collar jobs in fields like design, marketing, and software development. Employers would be able to use the service to compare the rates of individual freelancers and the kind of work they offer.

Marketplaces is going to replace ProFinder, LinkedIn's current effort at connecting freelancers with jobs.

Not long ago in a meeting with LinkedIn, ProFinder was described to us as an experiment.  The experiment evidently worked and LinkedIn is doubling down with Marketplaces.

LinkedIn clearly has a lot of assets and capabilities they can use to penetrate this market.  However, they are late to party.  It will be interesting to see how they do.

Whether successful or not, LinkedIn's decision to aggressively pursue this market is yet another clear signal independent work has entered the mainstream.

The Texas Power Outage and the Rise of Microgrids

Both of the partners at Emergent Research started their careers as economists, specifically energy economists.

So we've followed the Texas power outages and think just as the pandemic has accelerated digitalization and remote work trends, the Texas outage has accelerated existing trends driving the growth of microgrids and distributed power.

Microgrids are localized power generation grids that can disconnect from the traditional grid and operate autonomously.  

Natural gas, propane and gasoline powered backup generators are good examples.  

Less common but growing rapidly in number are solar panels connected to batteries.  

Microgrids are common at universities, hospitals and businesses - and are becoming popular with homeowners. 

Bloomberg's How the Rich Can Escape America's Unreliable Power Grid points out that PG&E, northern California's main electricity provider: 

"... has more than half a million residential solar customers, and at least 18,000 have installed battery energy storage systems. You hear a lot in California about “solar plus storage”: solar panels to harvest sunlight into electricity, paired with a home battery that can store the electricity for later use, like after the sun goes down." 

Californians are turning to solar for a variety of reasons (environmental concerns, to save money), but a growing reason is the rolling blackouts that have become increasingly common during fire season, which now occurs regularly in the fall.

As the Bloomberg article title implies, going the full solar route is still a bit expensive.

But solar power costs continue to fall, and Texas and California's power failures show that big, highly connected, and complex power systems - which are very efficient when they work - are also prone to very big failures.

And, as climate change brings more frequent and intense storms, floods, heatwaves, wildfires and other extreme events, there will be more power disruptions and failures.

This will lead to increasing demand for microgrids and other forms of distributed power.

Which, as we've pointed out in the past, will create new opportunities for small businesses.

Professional Services Business Applications from Freelancers Continued their 2020 Surge in January.

In 2020 professional services applications from independent workers (freelancers, independent contractors, etc.) increased by 21% over 2019.

Most of the 2020 increase came in the second half of the year and continued into 2021, with professional services applications from independents increasing in January by a stunning 51% over January of 2020.

This data comes from Independent Workers Lead Recent Surge in Professional Service Business Applications, a research brief from MBO Partners that is based on an analysis of U.S. Census Business Formation Statistics.  

The recent increases are a continuation of a long-term trend towards growing numbers of new professional services business applications from independent workers.

As the chart below (click to enlarge) shows, professional services applications from independent workers (in blue) almost tripled over the past 15 years, growing from 140,365 in 2005 to 419,073 in 2020.

Another long-term trend is the shift away from employer business applications and towards applications from independent workers.

In 2005 over half (55%) of professional services business applications came from businesses planning to hire traditional employees, while only 45% came from independent workers. 

But by 2020, independent worker business applications had increased to 76% of all professional services applications, with only 24% coming from businesses planning on hiring traditional employees.

The research brief goes into more detail on this data and the trends driving these shifts.  A key reason, of course, is the pandemic has more considering becoming independent workers.

Professional Services (NAICS 54) is comprised of businesses that specialize in performing professional, scientific, and technical activities for others. See the research brief for more details.

Emergent Research worked with MBO Partners on this study.

Creative Boom on What They Never Tell You About Becoming a Freelance Creative

There's lots of articles these days covering how to become an full or part-time independent worker (freelancer, independent contractor, gig worker. etc.).  

One of our recent favorites is What they never tell you about becoming a freelance creative from Creative Boom.

The reasons we like it so much is the article's 8 insights for freelancers are all things we regularly hear in our interviews and survey research.

We also like that the insights are effectively and succinctly described.   

The 8 are:

1. You're running a business
2. Your income won't be consistent
3. The need for self-promotion never ends
4. Big clients aren't always the best clients
5. It helps to find a niche
6. You can quickly burn out
7. It can get lonely
8. You need to play the long game

See the article for the descriptions. 

There's really nothing new in this list. 

But based on our research, even many experienced independent workers are either unaware of these insights or choose to ignore them.

Back in 2008 we studied independent artists who were successful both artistically and commercially.  One of the key findings of the study was successful independent artists understood they were running a business and invested the time and effort running a business requires.  

This finding is still valid today.  

Will Coworking Be One of the "Big Winners in the Age of Remote Work"?

Business Insider has an excellent interview with Richard Florida, a leading expert on cities and urbanism and the author of The Rise of the Creative Class.

The interview covers a lot of interesting ground, and it’s well worth reading.

But one quote from Florida really jumped out at us:

Human beings are social animals. We require connection, we require human interaction. Remote workers who are by definition working outside of the office will require more of this.

People will gravitate to places where they can meet and interact with others outside of the home and outside of the office.

The big question of our time, which we are just beginning to engage, is what is the ecosystem that is required for remote work?

That ecosystem is a community, not just a technology equipped home-office. The places that can build that ecosystem or where that ecosystem arises organically will be the big winners in the age of remote work.

This reads like a sales pitch for coworking. 

And we believe coworking will become a key part of the remote work ecosystem and one of the big winners in the age of remote work.

Book Review: Building the Business of You

Building the Business of You aims to help people "navigate the uncertain, post-pandemic world of work, while aligning personal purpose and professional advancement." 

And it hits the target with practical, actionable advice on taking charge of and building a career in the new world of work.

The central concept of the book is what the author calls the "career mashup". 

This is a career where workers merge their skills, interests, passions, and experiences in a way that fits a person's whole self.

While this sounds a bit new agey, there's a growing body of research showing that work that is is consistent with a person's values, interests and passions leads to greater career success and overall happiness.

To help develop a mashup career, the book explains to readers how to:

• Push past the fear that holds them back and build limitless confidence to move forward.
• Align their interests, strengths, and skills to get them where they want to be.
• Spot the common threads between skills and experiences and leverage them like a pro.
• Expand their sustainable skillsets.
• Identify the full value they bring to every new network so they can socialize with confidence.
• Leverage themselves as their own best assets.

Think of Building the Business of You as a guidebook for the new world of work.

You can learn more about the book and get additional tips and career resources at the book's website.                  

It Had to Happen. A Gig Economy SPAC

A SPAC is a special purpose acquisition company.  A good description comes from CNBC's SPACs used to be a joke in Silicon Valley — now they’re going mainstream. Key quote:

In a SPAC, a group of investors raise money for a shell company with no underlying business. The SPAC goes public, generally at $10 per share, and then starts hunting for a company to acquire.

A new SPAC called Z-Work was recently formed that's focused on the gig economy.  According to their website, they describe their ideal acquisition as having the following characteristics:

• Using technology to change how people find work, get work done or make ends meet
• Demonstrated sustainable growth potential
• Management driving continued innovation
• Strong, clear value proposition to their customers
• Leveraging data to constantly improve the product and operations
• Benefiting from demographic and/or societal tailwinds" 

SPACs used to be somewhat rare, but there's now a SPAC frenzy going on.  

According to Yahoo Finance's What the SPAC frenzy tells us about the market and ourselves:

In 2019 59 SPACs worth $13 billion were created. Last year there were 248 worth $83 billion. And already, just six weeks into this year, there are 135 SPACs which have raised $40 billion.

Even the ex-San Francisco 49ers quarterback Colin Kaepernick, who is famous for taking a knee during the national anthem, has formed a SPAC.

So it's no surprise there's a gig economy SPAC.

New Business Applications Surged Again in January

Over the past 6 months new business applications have surged. 

As the U.S. Census chart below shows (click to enlarge), the surge is continuing with 492,000 applications filed in January. This us up 73% compared with last January. 

Most of the applications are what the Census calls "applications other than high propensity" (grey in the chart).  These are applications from businesses that are unlikely to have employees, such as freelancers, independent contractors and other types of solopreneurs.

But employer small business applications (high propensity applications) have also surged.  

The business applications data comes from IRS Employment Identification Numbers (EIN) applications.  EIN's are the tax id number that identifies a business. 

Not all small/solopreneur businesses have EINs. Some, and especially independent workers working part-time, use their social security numbers instead.  But almost all employer businesses have EINs.  

While only about 15%-20% of applications have historically turned into actual small businesses, the surge indicates we should see strong growth in the number of independent workers and employer small businesses over the next 2 years.  

See our prior posts on the surge in new business applications for more details on the surge.

See the U.S. Census Business Formation Statistics site for more data. 

Nonprofit Sector Has Lost Close to Million Jobs During the Pandemic

The nonprofit segment is quite large, employing more than 10% of all U.S. private sector workers.  This is more workers than in the manufacturing, construction, or finance sectors.

So it's a problem that nonprofits have been hit hard by the pandemic.

The chart below (click to enlarge) comes from the Center for Civil Society Studies at Johns Hopkins University. 

It shows employment in the nonprofit sector has fallen by over 900,000 jobs since the beginning of the pandemic.

Other sources have the job losses greater than 1 million jobs.

And when a nonprofit closes or reduces jobs, the community it serves is also hurt.  Key quote from the Axios article Nonprofits in crisis amid the pandemic:

"When you lose a nonprofit job, you’re not only losing that job, but the community is losing a service," says Tim Delaney, president and CEO of the National Council of Nonprofits. "It’s a double whammy."

According to Johns Hopkins, the nonprofit sector's recovery will likely be slow.  They're projecting it will take 18 months after the pandemic for the sector to recover fully.

Nonprofits are mostly small businesses, which is why we cover them.  According to the National Council of Nonprofits, 88% of all U.S. nonprofits have less than $500,000 in annual expenses and only 8% spend more than $1 million.

Prior to the pandemic, the nonprofit sector had been growing more rapidly than for-profit SMBs. And hopefully, they'll get back on track.  

The Long Term Shift in Business Applications to Solopreneurs

In the early 2000s, about 60% of all new business applications were from businesses planning on having employees.  The other 40% were from solopreneurs who did not plan to hire employees.

But as the chart below shows (click to enlarge), by 2015, 57% of new applications were from solopreneurs (orange in the chart).  And in 2020, 66% of new business applications were from solopreneurs.

The data comes from the U.S. Census Business Formation statistics, which tracks applications for Employer Identification Numbers (EIN).  Because EINs are needed for tax reporting, almost all employer businesses and most solopreneurs have them.  

This data nicely illustrates the long-term shift towards independent workers and the growth of the independent workforce. 

See this article for details on the business formation statistics and the 2020 surge in new business applications.  

Side Giggers and Independent Workers in Super Bowl Ads

We haven't seen all the Super Bowl ads yet, but we know independent workers will be featured in two of them.

Squarespace's ad (below) features Dolly Parton singing 5-9, a take off on her hit song and movie 9-5.  It shows a variety of side giggers pursuing their passions.

Fiverr also has a Super Bowl ad, but we haven't seen it yet.  But no doubt it will feature creative independents.

Being featured in Super Bowl ads is a clear signal that independent work in general and side gigs have gone mainstream.

 

 

The Rapidly Growing Creator Economy

Axios' App rush: Talent over trash covers the growth of social media apps where the content is created by digital content creators who are getting paid.  Key quote:

The big picture: Creator-economy platforms like Patreon, Substack and OnlyFans are built around content makers who are paid. It's a contrast to platforms like Facebook that are mostly powered by everyday users’ unpaid posts and interactions.

Most of the creator economy platforms pay creators in some form of royalties or advertising revenue share agreements. 

But some of them - Patreon and Substack, for example - provide mechanisms for creators to have more direct relationships with their fans and generate revenue a variety of ways (subscriptions, merchandise sales, etc.).

According to the venture capital firm SignalFire, there are about 50 million income earning creators across the globe (click to enlarge the charts below).

This estimate was developed using a bottom's up count across the major creator platforms such as YouTube, Instagram, Twitch and others.  The estimates of professionals versus amateurs are based on traffic.  

And as the chart below shows, there are numerous platforms catering to creators.

Key quote on how SignalFire explains the rapid growth of the creator economy:

So how did creatorship grow so quickly? There’s been a societal shift in consciousness towards caring more about feeling fulfilled in our jobs, having control over how we spend our time, and being our own boss. Fans see creators doing what they love for a living and aspire to follow that path that never leads to a cubicle.

Regular readers will recognize this is basically the same explanation as one of the main reasons why the independent workforce has grown, which is the desire for work autonomy, control and flexibility.

A variety of names have been used for the creator economy.  We include content creators in our definition of the Artisan Economy, which we started using  over a decade ago. It's a broader definition and includes makers, crafters and knowledge artisans.  And, of course, creators earning money independently are independent workers.  

More recently, the venture capital firm Atelier called it The Passion Economy in an essay that drew a lot of attention. 

But even more recently, Atelier switched to calling it the creator economy in their Harvard Business Review article The Creator Economy Needs a Middle Class.

This article points out one of the issues facing the creator economy is while a few creators make lots of money, most make very little.  Key quote:

On Patreon, only 2% of creators made the federal minimum wage of $1,160 per month in 2017 ... On Sportify ... the top 43,000 artists — roughly 1.4% of those on the platform — pull in 90% of royalties and make, on average, $22,395 per artist per quarter. The rest of its 3 million creators, or 98.6% of its artists, made just $36 per artist per quarter.

We think the creator economy will continue to rapidly grow.  We also think the name is here to stay (at least for awhile).    

BTW, Atelier's newsletter is excellent and anyone interested in the creator economy should sign up for it.

CNBC's Ultimate Side Hustle Guide for 2021

The number of people who have side hustles (also called side gigs) has been growing rapidly over the past 5 years.  

The reasons for this growth - and how to start and run a side gig - are nicely explained in CNBC's extensive field guide The Ultimate Side Hustle Guide.

Key quote on why more people are starting side gigs:

"Starting a side business is one of the smartest financial moves you can make right now. With the economy shaky, no one can have too much income diversity. Even people in seemingly secure public sector jobs have been hit with furloughs and layoffs since Coivd-19 struck ... Even if you aren’t worried about job loss, a side hustle can be a great source of extra income to pay down debt, save money and invest."

The guide goes on to provide practical and useful information covering everything you need to know to get going on a side gig.  The guide's topics include:  

Which side-hustle you should launch?

How much will a side gig cost you?

Getting a side hustle started

Figure out when and where you will run your side-hustle 

How to develop a budget and financial plan

Don’t forget tax planning

Open a separate checking account for your side hustle

Create a simple record-keeping system

Getting set up

Winning your first customers

Keep your business thriving

Even experienced side hustlers will find this information useful. And, of course, those new to side gigs will find it invaluable.