May 18th: Entrepreneurship in the AGE of COVID

A collection of recent papers on entrepreneurship in the COVID era.

Presenter 1: Christopher Stanton (HBS)

"How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey" (joint with Alexander W. Bartik, Marianne Bertrand, Zoë B. Cullen, Edward L. Glaeser and Michael Luca)

Abstract: In addition to its impact on public health, COVID-19 has had a major impact on the economy. To shed light on how COVID-19 is affecting small businesses – and on the likely impact of the recent stimulus bill, we conducted a survey of more than 5,800 small businesses. Several main themes emerge from the results. First, mass layoffs and closures have already occurred. In our sample, 43 percent of businesses are temporarily closed, and businesses have – on average – reduced their employee counts by 40 percent relative to January. Second, consistent with previous literature, we find that many small businesses are financially fragile. For example, the median business has more than $10,000 in monthly expenses and less than one month of cash on hand. Third, businesses have widely varying beliefs about the likely duration of COVID related disruptions. Fourth, the majority of businesses planned to seek funding through the CARES act. However, many anticipated problems with accessing the aid, such as bureaucratic hassles and difficulties establishing eligibility.

Presenter 2: Jorge Guzman (Columbia)

"The impact of COVID-19 on U.S. entrepreneurship: early evidence from the Startup Cartography Project" (joint with Catherine Fazio and Scott Stern)

Abstract: coming soon.

Presenter 3: Josh Lerner (HBS)

"Financial Distancing: How Venture Capital Follows the Economy Down and Curtails Innovation" (joint with Sabrina Howell, Ramana Nanda and Richard Townsend)
Abstract: Although late-stage venture capital (VC) activity did not change dramatically in the first two months after the COVID-19 pandemic reached the U.S., early-stage VC activity declined by 38%. The particular sensitivity of early-stage VC investment to market conditions--which we show to be common across recessions spanning four decades from 1976 to 2017--raises questions about the pro-cyclicality of VC and its implications for innovation, especially in light of the common narrative that VC is relatively insulated from public markets. We find that the implications for innovation are not benign: innovation conducted by VC-backed firms in recessions is less highly cited, less original, less general, and less closely related to fundamental science. These effects are more pronounced for startups financed by early-stage venture funds. Given the important role that VC plays in financing breakthrough innovations in the economy, our findings have implications for the broader discussion on the nature of innovation across business cycles.

Presenter 4: Yael Hochberg (Rice) "The effects of COVID-19 on early stage innovation driven entrepreneurs: evidence from an in-process field study"