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Guest Post by Tuomas Toivonen

On the back of the financial crash in 2008, the political and economic ramifications were felt around the world. Perhaps due to some reticence about joining big corporations affected by the crash, the aftermath saw entrepreneurship experience an unprecedented boom over the past decade. 

Whether it was people deciding to run startups or “be their own bosses” as freelancers, entrepreneurship has been considered not just a valid career path but an attractive one. Although there have always been risks involved, they have often seemed more manageable than they are currently. 

The tables have turned; the Covid-19 crisis has created an atmosphere in which the prospect of failure is now at the forefront of people’s minds. But does this mean the younger generation will shy away from starting their own businesses? Perhaps not. 

The SME landscape 

SMEs now account for over 99 percent of all European enterprises, and the majority of those are microbusinesses with fewer than 10 employees. During Covid-19, these enterprises have been particularly vulnerable to fluctuations, economic changes, and societal shifts.

Downsizing a small business is difficult because they are already pushing capacity with individuals often effectively on full departmental roles. By reducing headcount a whole area of a business may be compromised. They are also less diversified in their economic activity. Moreover, cashflow quickly becomes an issue because they are heavily reliant on credit and have fewer financing options. 

During the last recession, many entrepreneurs also faced the issue of securing debt and equity finance to stabilise or grow their businesses. However, in the long-term smaller businesses on the whole seem to be more flexible, responsive and resilient than their larger, more bureaucratic counterparts according to the London School of Economics and Political Science. 

At first glance, the above appears to make for grim reading, but there is more to it than meets the eye. Instead these times of economic instability are precisely the times when the best entrepreneurs are able to take advantage of new opportunities. Even more so as large firms and the public sector withdraw from markets or shrink capacity. 

Survival of the Startup

Studies show that people who experience a crisis that threatens their existence at a young age are shaped by this ‘lived experience’ for the rest of their lives and are usually more averse to risk. But SMEs attract resilient, entrepreneurial characters with a desire for independence. Something which during times of conflict can be even more attractive as they look for a way to be in control. This is something we have seen at Holvi too, with many SME customers pivoting in trying times and adapting to a ‘new normal’. 

More than just creating a positive environment, Vikas Shah, a professor of entrepreneurship at the Massachusetts Institute of Technology Sloan School of Management believes that crises like the 2008 crash and now Covid-19 help to bring new entrepreneurs to the fore, as they previously wouldn’t have considered opening their own businesses. Many young people would’ve previously defaulted to pursuing highly paid corporate and banking careers, but could now be more open to consider options outside that, simply because of a lack of jobs.

Given the next generation of potential founders are witnessing some very tough times for the self-employed, the key here is going to be how governments help entrepreneurs not only during but post-crisis. There are already some options in place thanks to Corona: multiple SME business support schemes, employee payment schemes and loans. But these schemes of course focus on existing businesses, rather than encourage new businesses to start. 

Instead organisations like the Start Up Loans Company have been helping businesses and young entrepreneurs access finance 2012. Which is something governments could double down on to help continue to encourage would-be entrepreneurs to start businesses. 

Diamonds in the rough 

Not to be too clichéd, but pressure is what creates diamonds. And these tough economic times could see a second wave of entrepreneurial spirit. Just like after the 2008 crash, where the rise of the ‘own boss’ mantra and SME aspiration came to flourish, so too post Coronavirus we could see the same. 

At Holvi we are looking to help foster this movement. We want to further evolve Entrepreneurship as a Service to better help people plan for their business future and make all the necessary contingencies for what might happen. 

Ultimately the reasons for being an entrepreneur haven’t really changed, even if perceived risk has heightened. Some areas of business will pick up faster, others will not. What we see as even more important is for all businesses to cultivate a strong and close relationship with their customers. How do you maintain customer relationships in a way that they will be there with you when the hard times hit? With corona, the risk feels palpable, but that can be a good thing as creating and sustaining businesses is difficult. Just don’t let that paralyse you. 

About Tuomas Toivonen, Co-Founder 

Holvi was concepted and co-founded by passionate entrepreneur and visionary technologist Tuomas Toivonen. Tuomas has founded multiple payment and technology companies, including Fishpool, a software consultancy, and Scred, a peer-to-peer money platform. Having consulted governments and mobile operators worldwide on payment infrastructure for over 15 years, he decided to build a radically improved business banking solution from the ground up. Holvi was born out of his own desire to have simple and efficient tools to manage the finances of his own companies.

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