Over the past few years, we’ve witnessed a boom in startups and growing interest in self-employment.   Is this a good thing for workers, communities, and local economies?  An excellent new issue brief from the Atlanta Federal Reserve, “Self-Employment: Dreams vs. Reality,” takes a deeper dive.  The study is based on extensive interviews with self-employed entrepreneurs  and gig workers, and asked them to comment on the pros and cons of self-employment.  The study notes that the pandemic spurred a boom in interest in self-employment, largely driven by the negative experiences many people faced during that time as well as pull factors such as a desire for independence and a need for more income.

The study offers a framework around four types:  informal businesses, formal businesses, specialized gig work, and generalized gig work, typically dependent on a platform such as Uber or DoorDash.  For all categories, workers identified independence and a sense of agency as primary benefits.  They all also noted the precarity of gig work, and these fears were especially pronounced among those in the generalized gig work category, where income streams may be more unpredictable and upfront costs are higher.  In general, these experiences suggest a clash between dreams and reality, especially for lower-income and lower-skilled workers, where the downsides of self-employment may outweigh its benefits.  However, this equation could shift with policy changes to address the social safety net offered to these workers and business owners.

An excellent new study from the Appalachian Regional Commission highlights the ongoing entrepreneurial renaissance underway across Appalachia.  Access to Capital and Credit for Small Businesses and Entrepreneurs in Appalachia examines the recent experiences of the region’s entrepreneurs seeking capital for business operations and growth.  Let’s start with the good news.  Entrepreneurship is alive and well in Appalachia, with new business starts up 57% when compared with 2019 numbers.  However, most of these firms remain quite small and the lion’s share of firms are sole proprietorships or microenterprises with less than ten employees.  The study identifies a mismatch between these firms and capital sources in the region.  Banks dominate the business finance landscape, with limited access to angel or venture capital.   These small firms need smaller capital infusions, typically in the $100-$250K range, or even very small microloans of under $10,000. Loans of this size can be difficult to access., especially from traditional bank lenders.  The report concludes with an excellent series of recommendations for developing new sources of capital, building more capital-ready businesses, and for further supporting the ongoing boom in small business starts across Appalachia.  If you’re looking for related background material, we also recommend the 2018 project (led by EntreWorks Consulting), Entrepreneurial Ecosystems in Appalachia.