The hustle of digital microbusinesses is helping communities survive the pandemic

Ever heard of Denison, Texas? I hadn’t, until recently. About 75 miles north of Dallas, with a population of around 25,000, the Denison Development Alliance (DDA) was looking for ways to help support their town’s small businesses in the midst of the COVID-19 crisis. With lockdowns and limited in-person visits, many of Denison’s small businesses were under serious economic pressure. William Myers of the DDA was looking for ways to help. His solution? Build an e-commerce incubator to help these small businesses extend their businesses digitally.

Like Myers, we all wish we could ease the economic turmoil and uncertainty that COVID-19 has brought with it. It turns out that millions of digital microbusinesses have a greater collective impact than previously understood. Policymakers and government agencies can learn from them to create programs that help these entrepreneurs multiply and thrive by growing household incomes and improve their communities’ resilience to downturns, as they are doing in Denison. 

During the current crisis, these microbusinesses have softened the economic blow to communities both large and small, urban and rural. The number of orders placed on their sites almost doubled between January and April, driven by consumers who were stuck at home and moved their spending online. That helps explain why communities with higher concentrations of these digital businesses tended to shed fewer jobs, even as mass unemployment swept the country. This resilience held especially true for people holding low-income jobs, a group that’s been among the hardest hit in recent months and is disproportionately made up of minority workers.

That’s a bright spot amid, what is oftentimes, gloomy news. And policymakers should encourage and study these effects. Much of it is detailed in a multiyear GoDaddy research project called Venture Forward, which combines information from GoDaddy’s millions of U.S. microbusinesses with data from a variety of government sources, and is available to the public. The microbusinesses studied — we call them ventures — are often operated as side jobs or aren’t registered as traditional small businesses, so their impact was unknown and have been largely overlooked by policymakers. Yet we’ve seen through our data, which has been analyzed by our research partners at Arizona State University, the University of Iowa and the UCLA Anderson Forecast, that ventures can improve the economic health of a community in ways that differ from brick-and-mortar businesses and big corporations.

A new metric for economic health

One key to this analysis is a new economic metric we call “venture density.” That’s the number of ventures per 100 people in a community. The data shows that increasing a community’s venture density can boost prosperity and reduce unemployment. That makes it a useful benchmark for policymakers at the town, city or county level as they create programs and incentives to navigate the current crisis and build more resilient communities for the future. 

The new COVID-19 period findings from Venture Forward, which cover the tumultuous period between January and April, bear this out. While the pandemic caused 22 percent of all U.S. small businesses to shut down, according to one study, the number of microbusinesses fell only 1.8 percent. 

The data shows similar resilience among what we consider highly active ventures, those that meet certain growth and activity thresholds, such as increasing internet traffic or orders. In any community, these highly active ventures have an outsized impact on the local economy. The Venture Forward data shows that adding one more highly active venture per 100 people — increasing venture density by just one — would raise the median household income in a county by $408, which is about 11 percent over the average change seen from 2016 to 2018. 

The new COVID-19 period data set suggests that creative entrepreneurs are finding new ways to stay in business or start new ones. They’re setting up online shops or digitizing the physical ones they already run. To better understand how they’re faring, we’ve taken a close look at three of these businesses that are expanding online, and started to look at the policies that give people the confidence to launch ventures and help them succeed. Some of these are getting a real-world test in Gilbert, Ariz., where Mayor Jenn Daniels is leading an effort to cut red tape for venture owners and launching programs to help them build and market their businesses. 

Using venture density to help assess a community’s economic health has helped Daniels, as it can help other civic leaders. It’s our hope that policymakers will begin to look at their communities, recognize the impact this class of entrepreneurs is having and embrace policies that make it easier to launch and grow ventures. Given the widespread challenges from COVID-19, and the ongoing effort by policymakers to get America back up and working, understanding venture density and its role in communities is a great place to start looking for a way forward.

Back in Denison their e-commerce incubator has now funded 10 local digital microbusinesses, helping them build and market their operations digitally. Moreover, with this funding provided by the DDA, they are helping these businesses — a specialty popcorn shop, an art gallery, a gift shop, a home good store, among others — reinvent themselves and find additional ways to sustain during this challenging period. Not only are they supporting themselves, they are supporting their families, their communities and, ultimately, bolstering their local economies.  

We can all learn from the hustle and sponsorship of Mayor Daniels and William Myers, as they seek new ways to drive economic stability, and eventually growth. And what would the impact be if communities around the U.S. did the same? I, for one, think it’s time we find out.  

Aman Bhutani is the chief executive officer of GoDaddy. Follow him on Twitter: @sh0kunin.