Big Tech Innovators Buoyed Small Business During Lockdowns

From lockdowns to layoffs, the COVID-19 pandemic has levied an enormous economic toll for more than a year. As scores of harrowing statistics reveal, COVID’s acute impact on American businesses and the workers they employ has been both material and manifest. Federal Reserve economists, for instance, recently found that the pandemic resulted in the permanent closure of roughly 200,000 more businesses than a typical year. Nationwide, the United States is still down 8 million jobs, and our two states of North Dakota and Georgia experienced job losses of 6.5% and 4.6% – as well as a 3.5% and 2.5% loss in GDP, respectively.

But during the dark depths of the worst economic crisis since the Great Depression, a bright spot emerged to power the small business sector’s trademark sense of resilience: America’s domestic tech innovators. The tools they build are working to buoy employers and entrepreneurs – particularly those in rural states like ours – at a time when they would have otherwise been drowned by the downturn. As a recent ABC News report on “how small businesses survived the pandemic” makes clear, technology helped “many [find] ways to turn their local customer base into a national one.”

Prior to the pandemic, e-commerce platforms were certainly an effective means through which businesses could bring their products or services to a broader audience; per a 2018 study released by the U.S. Chamber of Commerce, “84% of small enterprises [used] at least one major digital platform to provide information to customers,” while “75% [used] tech platforms for sales.” Yet, amid the pandemic, e-commerce has been elevated from a complementary asset to a critical lifeline. In the year that has elapsed since nearly one-third of small business noted that “without digital technology, they would have been forced to close all or part of their businesses,” it has been reported that “U.S. consumers spent 32% more online in 2020 than in the year prior” – “in the fourth quarter alone, e-commerce sales hit $245 billion, up from $185 billion in the fourth quarter of 2019, with $1 in every $5 spent on retail purchases happening online” – and that “93% of companies are now conducting some portion of their business online” in the B2B sector.

Accordingly, the American people are turning to tech companies to help drive the economic recovery. Per one recent poll released by the American Edge Project, 89% of voters believe “American tech companies have played an important role in helping the economy during the pandemic” – a belief underpinned “by their observations that American tech companies create products that make our lives better (85%), connect small businesses to the global market place (84%), connect small businesses to new opportunities (84%), strengthen the U.S. economy (83%), make it easier to grow a small business (82%), and make it easier to start a small business (79%).”

Each and every one of the foregoing 200,000 or so additional business closures is a tragic consequence of COVID – and just one closure amounts to one far too many. At the same time, however, it is important to put such a figure in the context of what could have been without the rapid, seamless shift to digitized operations: “one earlier study estimated that more than 400,000 small businesses had closed in the first three months of the pandemic… ‘Actual exit is likely to have been lower than widespread expectations from early in the pandemic,’ the Fed researchers said in their report.”

On a parallel basis, meanwhile, the strength of tech startups over the course of the COVID pandemic mirrors the remarkable resilience of the small business sector. According to PitchBook/NVCA’s recent report, “2020 proved to be a record year for the VC industry, positioning the industry to start 2021 on a strong footing. The industry did not disappoint as Q1 investment, exit, and fundraising activity all exceeded first quarter results from last year.” And as it relates to the prospering tech ecosystem, “the $57 billion invested in Q1 is the highest quarterly amount invested on record.” KPMG similarly concludes that “an incredibly strong exit market, high valuations, and a highly competitive market for VC deals helped drive VC funding in the U.S. through the roof in Q1’21.”

Any legislation regarding the lifeline of American tech innovation must be navigated with this knowledge in mind. Policymakers in Washington must not only recognize the industry’s remarkable impact, but also refrain from imposing any unintended consequences that’d undermine its capacity to continue contributing to our country’s economic comeback.