OPPORTUNITY COSTS

gious persecution in Iran that made it difficult to find and retain work. His dad was a construction and maintenance man but would often be denied contracts or go unpaid due to his faith. His mother, an educator, wasn’t allowed to teach in government-run schools, he says, and would tutor neighborhood children to bring in supplemental income.

Darakhshanian began his informal engineering training while on the job with his father in Iran. During technical classes, he built toy cars and got into robotics before working as an apprentice for a family friend, fixing laundry machines and electric water heaters.

After moving to the United States, he launched a series of tinkering businesses that supported him through high school and his mechatronics engineering degree at Middle Tennessee State University. He ran an ondemand phone repair service out of his car and later launched a hoverboard repair shop that helped him earn the money he used to open his first Boost Mobile store with a business partner.

“I have always been an entrepreneur. Ever since I was young.”

Darakhshanian describes his series of businesses as stair-steps to the next. The successful ones help lift him to new opportunities while the failures teach him hard lessons. He’s not sure where woodworking will take him long-term — open a shop or keep it a hobby? — but for now, he’s happy for the supplemental income to pay off debt and keep him on his feet through a difficult year.

“Before the pandemic, I was on the right path to my own financial stability, and I think that is another motivator,” he says. “Because if the trend continues, and I’m finally financially fully stable, then I can use that money for something else. I’ll have a different adventure, and I’m always looking forward to that day.”

OPPORTUNITY SHARE OF NEW ENTREPRENEURS

85%

80%

75%

70%

1996 More people than ever before started businesses out of need rather than opportunity in 2020.

2008 2020

High opportunity costs

Immigrant workers started businesses at double the national average in 2020

A Kauffman Foundation report on early-stage entrepreneurship in the United States during the COVID-19 pandemic showed that the creation of new businesses climbed as people’s opportunities — and other options — fell.

The rate of entrepreneurs, calculated by the number of nonbusiness owners that start a business each month, rose across all demographic groups in 2020 to the highest rate on record (going back to 1996). Last year, an average of 380 out of every 100,000 U.S. adults launched their own ventures — a rate that was 26 percent higher than in 2019.

Compare that to the so-called opportunity share of new entrepreneurs, the percentage of new business owners who launched companies out of opportunity rather than necessity: In 2020, that metric fell from an all-time high to an all-time low, plummeting 17.1 percentage points from 2019 — more than twice the 6.9 points it fell during the Great Recession of 2008.

In short: 2020 was a year unlike any other when it came to

NEW ENTREPRENEURS BY NATIVITY

0.6%

0.5%

0.4%

0.3%

0.2% Immigrant Native-born

1996

Source: Kauffman Foundation 2008 2020

new business owners turning to part- and full-time work because of severe economic insecurity and the loss of their jobs.

“The sharp decrease in the opportunity share in 2020 reflects the massive economic losses during the pandemic,” the Kaufmann report says. “As non-essential businesses closed to stop the rapid spread of COVID-19 and consumers cut back on in-person consumption, the share of new business creation originating from opportunities fell precipitously.”

Paralleling some of the social and health impacts of the pandemic, the economic repercussions also more acutely affected immigrants. According to the Bureau of Labor Statistics, the number of employed immigrants declined from 27.6 million to 21.9 million between February and April 2020. The number of foreign-born business owners also fell by 36 percent, compared to a 22 percent decline overall.

Driving some of those numbers were job losses in sectors deemed “essential” at the start of the pandemic — agriculture, forestry, construction, manufacturing, transportation and hospitality, among others — but that experienced the highest unemployment rates during the labor market collapse last year. In addition, many immigrants were ineligible or faced restricted access to social safety net programs, depending on their legal status.

That led immigrants to start their own businesses at double the rate of the national average. Smaller increases occurred among people who don’t have a high school degree, the Latinx population generally and among those aged 45 to 54. — Kara Hartnett