By Blake Hutchison, CEO, Flippa
We’re in a moment of economic uncertainty, with high inflation and a volatile stock market. Many people are worried about the possibility of recession, some industries (including the formerly high-flying start up tech sector) are already seeing a rise in layoffs, and the future of the post-pandemic economy is unclear.
But no matter what happens next on Wall Street or in Silicon Valley, there are strong signs that the future of online businesses is bright. Digital entrepreneurship and investment in start up digital businesses still have significant growth potential, even if America enters a recession.
Bottom line: digital isn’t going anywhere. Even if the overall economy goes into a slowdown, savvy investors and hard-working digital entrepreneurs are still going to be a powerful engine of economic growth.
Let’s take a look at why the future is bright for digital entrepreneurs and investors.
Digital Business Growth Exploding
The pandemic saw a historic rise in new business formation. Millions of entrepreneurs across the country started a side hustle to earn extra income, or entered into a new career field with online entrepreneurship to make money while working from home.
According to the National Bureau of Economic Research, applications for new Employer Identification Numbers (EINs) rose more than 20% between 2019 and 2020. These new business applications for “non-employers” (solo entrepreneurs) rose by 1.3 million between March 2020-May 2021, and “likely employers” (businesses likely to hire employees) rose by 500,000 during that period. New businesses in the category of Non-Store Retail accounted for a third of this growth.
Beyond lockdowns, people are still using their mobile devices as the center of their daily lives. Last year alone, there were 32 billion app downloads and people spent an average of 100 hours per month on mobile apps. Statista research projects that by 2025, mobile commerce sales will account for 10% of total retail sales in the U.S.
Mobile commerce and other digital business activities are still scratching the surface of what is possible for savvy entrepreneurs and start up founders.
Finding Success in Start Up Sized Packages
Most of these new businesses formed during the pandemic are not going to become the next Amazon. But they don’t have to be Silicon Valley unicorns or tech media darlings to be successful. Recent data shows that there is strong, growing demand for profitable online businesses at a smaller scale.
Between Q2 2021 and Q2 2022, Flippa saw YOY listings growth of 119%, and 318% growth in total valuation of the online businesses on its platform. And during the first half of 2022, the Flippa marketplace for online businesses saw 54 companies register as prospective buyers for mobile apps, with a total acquisition budget of more than $330 million.
Small online businesses (under $500K-$10MM in annual revenue) with demonstrated profitability are still an in-demand investment opportunity, even amid the volatility in the public stock markets. Small online companies, websites, and other digital assets were not over-hyped and over-valued; their performance is reliable and time-tested, and their investors are taking a long-term approach, betting on a future where digital activity continues to be a center of everyday life.
These investors believe that there is big potential for growth in the start up mobile app ecosystem, and innovative entrepreneurs don’t have to buy big-name tech stocks to capitalize on it – there are many smaller, proven, profitable businesses for sale that are poised to deliver healthy ROI.
Digital Entrepreneurship is Diverse and Inclusive
One of the biggest challenges of our time is how to create a more prosperous and inclusive economy that embraces the talents and contributions of a diverse population. For too long, women and underrepresented minority groups have been overlooked by investors, and have been excluded from career opportunities and access to capital. When talented people get a fair shot at business opportunities, the entire economy benefits.
Companies are making big strides to get serious about Diversity, Equity & Inclusion (DEI), from hiring policies to philanthropy. Goldman Sachs launched the One Million Black Women initiative to provide $10 billion of investment capital to increase opportunities for Black women – and the firm’s research found that reducing the earnings gap for Black women would create 1.2-1.7 million jobs and boost U.S. GDP by $300-$450 billion per year.
One of the biggest forces for DEI is entrepreneurship. 40% of businesses in the U.S. are owned by women, and these companies generate $1.8 trillion per year. Digital entrepreneurship can be particularly valuable for people who want a flexible schedule, who want to care for children or other loved ones, who might have experienced discrimination in a traditional workplace, and who want to create their own career path without the limitations of corporate structures.
No matter what happens today with big names on the NASDAQ, there are big opportunities brewing in smaller, overlooked and underrated spaces of the digital economy. People are still discovering new ways to create value with mobile apps and unlock human potential from their phone screens. The future is being created by the digital entrepreneurs and start up online business investors.
Blake Hutchison is the CEO of Flippa. the #1 marketplace to buy and sell sites, stores, social media accounts and online businesses. Blake has worked on leadership teams assisting in fast growth businesses including Xero and Luxury Escapes. Among his start up experience he also founded a company…he then used Flippa to sell the business.