Business starts surge over 55% during coronavirus pandemic to a record high in Tennessee

The coronavirus crisis limited travel, gatherings and even most dining out or entertainment for a while last year, cutting more than 22 million U.S. jobs, including more than 42,000 jobs across Tennessee.

But amid the challenges of COVID-19, the pandemic also spurred a record number of business starts in Tennessee.

New business filings in the first quarter of 2021 grew by more than 55% from a year ago to a record high during the first three months of the year. Tennessee Secretary of State Tre Hargett said the jump in business starts so far this year marks the largest year-over-year gain in the 28 years his office has kept such business filing data "and is an encouraging sign and strong vote of confidence in Tennessee."

Spurred by the job disruptions caused by the pandemic and aided by government stimulus payments and assistance, many displaced workers seized the chance to start their own business during the pandemic, experts say.

"Despite the widespread economic disruption the pandemic launched, forcing thousands of small businesses to shut their doors, American entrepreneurship has skyrocketed," said Victoria Baltz, the resource coordinator at the INCubator, Hamilton County's business development center in North Chattanooga. "We're seeing that play out locally too, especially in our Hamilton County INCubator."

The county's Business Development Center has attracted 26 new business startup tenants in the past year, Baltz said.

One of those is Ecophene LLC, a startup dedicated to climate change reversal, that manufactures industrial-grade graphene from atmospheric carbon dioxide for integration into consumer products, at a cheaper price than conventional fiberglass. But as business slowed during COVID-19 outbreak, the Ecophene team needed a space to regroup, organize and plan next steps for when the economy fully reopens, and the INCubator provided the resources to do that, Baltz said.

Staff photo by C.B. Schmelter / Tennessee Secretary of State Tre Hargett

Hoop Junky, a custom hula hoop company, lost a previous space without much notice at the beginning of the pandemic, when the landlord had to sell the building. Affordable rent drew Hoop Junky to the INCubator, coupled with the business development assistance.

Hal Bowling, co-founder and executive director of the nonprofit group formed to aid startup businesses in Chattanooga known as LAUNCH, said his group saw a 50% jump last year over 2019 participation levels "and 2021 is staying pretty much on track with that too.

"Additionally, our classes are filling up much faster than normal- months out, rather than weeks," Bowling said. "Home-based businesses are up. It seems people are looking for freedom, safety and a way to deal with childcare, and with online shopping up, online businesses are also up."

Dr. Bill Fox, director of the Boyd Center for Business and Economic Research at the University of Tennessee, said the growth of the gig economy, especially in places like Chattanooga that bills itself as "the Gig City" because of its high-speed internet service, has lowered the barriers to entry and the ability to reach new customers are much less than in the past. Fox said he thinks Tennessee is becoming more of an entrepreneurial economy as new technologies emerge, but he said the "amazing 55 percent surge we saw in this quarter is probably not going to be repeated."

"As companies shut down, it created a need for people to find other ways to support themselves and it created new opportunities for business to get done in a different way," Fox said. "Likely, a lot of these companies that are starting up are being launched by people who say, "here is my chance in life to start my own business and create my own income.'"

The first quarter of 2021 is the third straight quarter where new business filings grew by over 30 percent from the prior yea, Hargett said. Typically, a strong annual gain for any given quarter would be about 15 percent. The record-breaking boom over the last three quarters has roughly doubled or tripled top quarters from the past.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.