An interview with Dr. Lakshmi Balachandra, professor of entrepreneurship and fellow in the National Science Foundation’s Directorate of Innovation and Technology Partnerships program.
The pandemic has unleashed a flurry of new entrepreneurs. If the economy goes into recession, do you think that trend will continue? Yes. In fact, history has taught us that it is typical for economic downturns to coincide with rising rates of entrepreneurship. Necessity is the mother of invention. If people cannot find a job or are not satisfied with their job, they are much more likely to want to start their own business and do something on their own.
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Why has the pandemic led to an increase in individuals going into business for themselves? One of the biggest drivers for entrepreneurship is lifestyle. The pandemic has illuminated how work has become challenging for people who face difficult commutes and the high cost of housing, childcare, elder care—the list goes on. It also led to the recognition that your time has an incredible economic value that you don’t have to sacrifice when you work alone. People who become entrepreneurs certainly see an economic opportunity, but the biggest motivation is that they want to be their own boss and set their own hours. You can structure your work in such a way that you achieve your internal rate of return, with the benefit of adding value to your lifestyle.
Female founders secured only 2.3% of venture capital funding in 2020. What barriers do women and minority entrepreneurs face? This is the question I have been working and dealing with for over 20 years. Women and minorities are not typically seen as leaders or managers or entrepreneurs, so they are already at a disadvantage, and if anything, COVID has made it worse. With networking canceled or limited for Zoom, networking opportunities for people other than those already in the funding network have diminished.
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How can they overcome those obstacles? Much of how you get funded is based on how you are evaluated as an individual—that is, what kind of potential investors see in your ability to understand the market and run a business for financial success. We’ve done all sorts of things to try to get women and minorities more access to capital, but there’s nothing that drives venture capitalists to change the way they do business. They can still get investments from governments and limited partners. There has been a lot of talk about training women and minorities to solve the problem. They do not need training. They just need money.
What advice do you have for aspiring entrepreneurs? It’s all about conversations. If you want to know how someone was able to build a business, people are often willing to share their story. Find out how they got the start-up capital and if that’s something you can do. The more people you meet, the more connections you make to learn more. And in addition to meeting and talking to people, do your research. Learn about what the competition looks like, the buying habits of potential customers, and the rules and regulations for your business.