GEM 2021/2022 Report: Key Insights

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THE RESILIENCE OF ENTREPRENEURSHIP Despite the Pandemic’s Lasting Effects GLOBAL ENTREPRENEURSHIP MONITOR 2021/2022 United States GEM Report / Key Insights

THE RESILIENCE inresearchperceptionssurveyedEveryENTREPRENEURSHIPOFDespitethePandemic’sLastingEffectssummersince1999,theGEMU.S.teamatBabsonCollegehasover2,000adultAmericansandassessedtheirattitudesandaboutentrepreneurship.Todate,hundredsofacademicteamsin117economiesaroundtheworldhaveparticipatedtheGEMproject.

For the past 2½ years, the COVID-19 pandemic has significantly impacted the lives of entrepreneurs and established business owners. Results based on survey questions about the impact of COVID-19, taken together with longitudinal U.S. data collected by GEM over many years, highlight how the pandemic has shaped the outlook, successes, and challenges of entrepreneurs and established business owners across the country. The report demonstrates that these individuals recognized opportunities, adopted new technologies, and pursued growth with their business ventures. The data also presents the question: During an environmental shock as widespread as the pandemic, do those with an entrepreneurial mindset fare better because of their curious, problem-solving nature? These insights will help the public and private sectors shape responses, identify policies, and develop initiatives to continue supporting entrepreneurship.

The 2021/2022 U.S. Global Entrepreneurship Monitor (GEM) Report / KEY INSIGHTS 1

The key to staying relevant is to diversify your business enough so that failures don’t define you. Learn and grow from breakdowns, turn them into breakthroughs, and move on.


The impact of the COVID-19 pandemic continues to be far reaching, and entrepreneurs didn’t escape the negative economic effects and pressures of the pandemic in its second year. However, many found and pursued new opportunities to endure and persist through the crisis in 2021. Though its business closure rate was among the highest reported in GEM’s history at 4.3%, this year also witnessed a high percentage of entrepreneurs and business owners seeking new opportunities and implementing adaptive actions, perhaps as a response to the environmental shock of the pandemic.

THE WINS AND LOSSES from the COVID-19 Pandemic

– Sarah Switlik Brooks, Switlik Parachute Company

4.3%52%43%of Americans closed a business, which is among the highest closure rates in GEM’s history. of entrepreneurs thought that COVID-19 provided new opportunities to pursue with their businesses. of established business owners stated they expected higher growth than in the prior year. In 2021: Other high points were reported in 2007 and 2008, around the time of the global economic recession. The 2021/2022 U.S. Global Entrepreneurship Monitor (GEM) Report / KEY INSIGHTS 3

– Donna J. Kelley, Professor of Entrepreneurship, Frederic C. Hamilton Professor of Free Enterprise Studies, and Chair of the Entrepreneurship Division at Babson College 4

Who Were AnENTREPRENEURS?theEntrepreneurialRiseAmongGenerationZ

This year’s GEM report presented a high pattern of entrepreneurship rates among the youngest adult age group: Individuals age 18–24 exhibited high entrepreneurial intentions and total entrepreneurial activity, a key finding that GEM has not seen in recent history. More broadly among the 18–34 age group, 67% emphasized a focus on environmental sustainability and 58% were highly likely to take actions to maximize social impact and positively impact their communities. In a recent study, The World Economic Forum (WEF) found that Gen Z cares more about sustainability-driven buying decisions than brand names, and that “this first generation of digital natives is inspiring others to act more sustainably.” This enthusiasm and increase in activity is a positive sign that many young people are starting their careers exploring entrepreneurship, and developing capabilities and perceptions that will benefit society and themselves throughout their careers. Generally entrepreneurship rates peak among those who are old enough to have enough work experience, resources, and networks they can leverage in starting their businesses. But, this recent GEM survey shows a growing interest in entrepreneurship among young people, who can bring novel ideas, their knowledge of youth market segments, and their openness to risk and learning, to the entrepreneurship ranks.


In contrast, there is a great disparity between entrepreneurial activity and the established business ownership phase, particularly among the Black population, as well as the Hispanic population. Though they both report significantly higher rates of entrepreneurial intentions and activity than the White population, the percentage of those in the mature business phase is notably lower. This raises a number of hypotheses and questions: Will there be more established business activity from entrepreneurs of color in the future? What are the specific challenges Black and Hispanic entrepreneurs encounter in sustaining their businesses into a mature phase? What can be done to combat this disparity? These points highlight the importance of identifying challenges and needs specific to underserved groups, and of designing initiatives that support their entrepreneurial efforts. people

Of the racial groups surveyed and reported, the GEM data reveals that Black people rated highest in several categories regarding entrepreneurship: Compared to White and Hispanic people, Black people are most likely to state there are opportunities around them for starting businesses (77%), and least likely to state that fear of failure would stop them from starting a business (32% among those seeing of Black people (23%) have entrepreneurial intentions (compared with 12% of White people and 20% of Hispanic people), and nearly one-third are entrepreneurs, over 2½ times the rate reported among the White population (32% of Black people, 12% of White people and 17% of Hispanic people).

state that entrepreneurship is a good career choice81% 79% Hispanic 74% White Percentage maturesurveyedentrepreneursofinthebusinessphase The 2021/2022 U.S. Global Entrepreneurship Monitor (GEM) Report / KEY INSIGHTS 5


Black and Hispanic Populations Show High Rate of Entrepreneurial Activity

When it came to starting new businesses during the pandemic, entrepreneurs encountered challenges, and some discovered new opportunities. Unique this year and perhaps closely linked to the pandemic are the changes in fear of failure between men and women. Historically, the gap has remained significant, with women reporting a fear of failure at a higher rate than men. However in 2021, women’s perceived fear of failure was nearly equal to that of men, with women at 43.4% (down from 46% last year), and men at 41.8% (up from 37% last year).

ADAPT through the Height of the COVID-19 Pandemic?

Keisha Greaves, Founder, Girls Chronically Rock

It is possible that the drastic changes in how work was done—working from home, reliance on technology, sharing of family responsibilities—decreased the perceived risks for women, and the continued effects of the pandemic increased the perceived risks for men.

Keisha is a motivational speaker, has a Master’s in Business Management, and is the Massachusetts State Ambassador for the Muscular Dystrophy Association.



After being diagnosed with Muscular Dystrophy, Keisha Greaves started her own line of T-shirts called Girls Chronically Rock to inspire others with chronic illnesses to have confidence in themselves and not let their disability define who they are.


The 2021/2022 U.S. Global Entrepreneurship Monitor (GEM) Report / KEY INSIGHTS 7

ONE-THIRD of entrepreneurs already use a range of digital technologies in their business. AND

ONE-FOURTHANOTHER adopted or enhanced their use of digital technologies in response to the pandemic.

35% of entrepreneurs thought that starting a business was more difficult than it was a year earlier (a significant decrease from 82% in 2020). 42%MEN

For the first time in many years, women’s perceived fear of failure is nearly equal to that of men:

One of the more unique findings in this year’s report that contributed to the increase in entrepreneurial activity is the prevalence of the youngest age group (18– to 24-yearolds), with high entrepreneurial intentions (20%), high entrepreneurship rates (19%) and high business closure rates (6.2%). (See FIGURE 2)

The most frequently cited motivator for starting a business was to build great wealth or a high income (74% of entrepreneurs), followed by a desire to make a difference in the world (71%). Last year’s top motivator, job scarcity, decreased by 4 percentage points (from 50% to 46%) in 2021. (See FIGURE 1)



The GEM results show an increase in entrepreneurship intentions and a restored faith in the outcomes connected to starting a business.

This activity can be a positive sign that many young people are starting their careers in the entrepreneurship realm, developing capabilities and perceptions that will benefit them, and society, throughout their careers. The high business closure rates may indicate that this age group needs more support and programming to scale and grow. Colleges and programs that build skills and instill ambitions for entrepreneurship can help students experiment with ideas and gain experience and confidence, particularly in devising impactful solutions. Both learning and applying that learning are key to gaining the experience, confidence, and resources they need to succeed.

TO MAKE A DIFFERENCE IN THE WORLD 65.8 78.6 67.2 67.1 85.3 93.6 35.8 47.6 51.0 43.6 51.7 47.0 TO BUILD GREAT WEALTH OR A VERY HIGH INCOME TO CONTINUE A FAMILY TRADITION TO EARN A LIVING BECAUSE JOBS ARE SCARCE 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Black HispanicWhite 18–24 25–34 35–44 45–54 55–64 65–74 25% 20% 15% 10% 5% 0% Intentions Established(non-entrepreneurs)BusinessOwnership 11.1% 3.1% 2.5% 2.7% ClosedTEA in Past Year FIGURE 1: MOTIVATIONS FOR TOTAL ENTREPRENEURIAL ACTIVITY BY RACE AND ETHNICITY IN THE USA, 2021 FIGURE 2: TOTAL ENTREPRENEURIAL ACTIVITY RATES BY AGE GROUP IN THE USA, 2021 The 2021/2022 U.S. Global Entrepreneurship Monitor (GEM) Report / KEY INSIGHTS 9

Connor Harbison is the founder of Atlas Urban Farms, an organization that designs hydroponic systems, bringing the whole food supply chain into restaurants so chefs can save money serving fresher food.

Connor Harbison, Atlas Urban Farms


The persistence of COVID-19 has brought a continued focus to the health of the planet, and the attention of entrepreneurs has certainly followed suit. In 2021, entrepreneurs focused on sustainability as core to their efforts to address social and economic inequities and environmental concerns. GEM included questions about environmental and social impact in the 2021 survey, and the conclusion is clear: There is a growing awareness that every business has an environmental impact, and that the onus to act sustainably is on the entrepreneur.


68% 54% 45% 49% of entrepreneurs prioritize the social and/or environmental impact of their businesses above profitability or growth. Of younger entrepreneurs ages 18–34 are more inclined to design their business models with sustainabilityenvironmentalinmind. Of older entrepreneurs ages 35–64 are less inclined to design their business models with sustainabilityenvironmentalinmind. of all entrepreneurs and established business owners stated that in the past year they had implemented actions to minimize the environmental impact of their businesses.The 2021/2022 U.S. Global Entrepreneurship Monitor (GEM) Report / KEY INSIGHTS 11


The GEM 2021 survey has shown the persisting effects of COVID-19 and the resilience of Entrepreneurship of All Kinds®

The GEM results emphasize a need to support entrepreneurs of all ages and backgrounds. This includes identifying the gaps hindering young entrepreneurs, women, and communities of color, and offering solutions that provide opportunity, connection, and sustainability in support of their vision and create rewarding livelihoods for their stakeholders, families, and themselves.

This year’s report calls significant attention to entrepreneurs’ growing awareness and action to minimize the environmental footprint of their businesses and maximize their social value, most especially among younger entrepreneurs between the ages of 18–34. For many of these leaders, an environmental shock like the pandemic acted as a catalyst to confront some of the world’s greatest problems, and take action to solve them with innovative business objectives. With more than half of young entrepreneurs emphasizing a focus on environmental and social impact, this next generation of leaders is setting new standards on these initiatives for the broader business community and mapping the path forward for a more sustainable and equitable future. It is the hope of the research authors that the results can educate and inform a broad audience of academics, educators, policymakers, and practitioners—advancing knowledge, prompting further research, igniting debate, and guiding decisions that ensure America’s entrepreneurial culture continues to thrive.


The results show that entrepreneurs and established business owners continued to adapt, adjust, and innovate during the second summer of COVID-19, practicing caution while still introducing new ideas and sustainable initiatives to drive their goals forward.

Babson is the co-founder and catalyst for the Global Entrepreneurship Monitor (GEM), the world’s largest and longest-standing globally focused entrepreneurship research project. Authors of the 2021–2022 GEM Report: Donna J. Kelley, Jeffrey Shay, Mahdi Majbouri, Candida G. Brush, Andrew C. Corbett, Caroline Daniels ©2022 Babson College. All rights reserved. 231 Forest Street, Babson Park, MA 02457

Babson College prepares and empowers entrepreneurial leaders who create, grow, and steward sustainable economic and social value everywhere. A global leader in entrepreneurship education, Babson offers undergraduate, graduate, and executive education programs as well as partnership opportunities.

For the full 2021–2022 GEM Report, visit: GLOBAL ENTREPRENEURSHIP MONITOR

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