This is how entrepreneurship will change in 2023

The last few years of unprecedented economic disruption look set to continue in 2023. The recent sell-off in equity markets, challenging funding rounds and significant lay-offs give us a glimpse of what the upcoming downturn has in store.

But counterintuitively, it is exactly these kinds of challenges that will create the perfect conditions for new businesses to be born and built. The best entrepreneurs thrive in times of turmoil. They know how to channel their fears and respond to – and even shape – disruption. They are non-conformists, unafraid to question convention and try something new. They can play a vital role in developing the new products and services we need to drive the global economy forward and overcome the inevitable challenges that will emerge.

As an entrepreneur myself, one thing above all lets me remain an optimist: everywhere I look, I see a new generation of founders building or planning to build new businesses.

In the UK, we’ve already seen the ongoing cost-of-living crisis spur a new trend towards entrepreneurialism, including more women than ever. Almost a fifth of women (17%) are considering starting a business; nearly half (48%) cite a desire for more money and more freedom of being their own boss as the motivation for getting started.

Many of the youngest people entering the economy have decided they need to make it on their own, rather than rely on someone else. According to research in the UK, a fifth of Gen Z sole traders say their small business is their first job out of education, having never entered the “traditional” labour market.

Through our Mentorpreneurship Programme, launched in partnership with the London School of Economics in June 2021, we’ve been inspired and encouraged by the number of young people considering entrepreneurship as a career path. The programme is the first university-run initiative of its kind and has been designed to support the development of socially minded businesses and inspire entrepreneurial thinking by focusing on the fundamental role of mentorship in business.

Many other budding founders are setting the trend of the “multi-hustle”, with over a third (36%) of Americans starting or planning to start a side hustle in 2022 compared to just a quarter (24%) who said the same in 2021. At OakNorth, we’ve worked with numerous entrepreneurs with side hustles, such as Andrew Rose and Simon Redwood, who have owned and operated children’s nurseries alongside their full-time jobs for the last eight years. Andrew is a Senior Quantity Surveyor for family-run housebuilder, Baxter Homes, while Simon works as a fireman near Blackpool.

Meanwhile, individuals who have been working for high-growth businesses during the longest bull market in history (2009-2020) have witnessed incredible start-up success and equity value creation. This has taught them to dream bigger and consider entrepreneurship more so than previous generations. They have also learned how to achieve significant scale on limited marketing budgets through activities such as social media, influencers and content creation. The economic downturn will teach many of these budding founders not to rely on Venture Capital (VC) funding to fuel their runway but to be disciplined and bootstrap. This will ultimately enable them to build stronger, more resilient, and importantly, profitable businesses. Plus, one of the silver linings of a recession is that it becomes cheaper and easier to start a business.

My business partner, Joel Perlman, and I started our first business, Copal Partners, while in our 20s and became second-time founders in our 30s. We were outliers for our generation, with entrepreneurship being seen as a plan B for those who couldn’t get a “normal job”. But times are, fortunately, changing, with many seeing the world’s challenges as opportunities to build socially minded businesses to tackle them.

Ongoing supply chain issues, rising fuel, fertilizer and feed costs, and the Russia/Ukraine war, for example, have brought the need for food and energy security into the spotlight. Meanwhile, COVID-19, COP26 and COP27 and numerous extreme weather events around the world have sparked a wave of ethical consumerism and increased awareness of the growing impacts of climate change. Many of the new businesses that will be born in the 2020s will likely focus on areas such as renewable energy, semiconductor, and battery design, cultivated meat, vertical farming and food waste management. For example, a start-up I invested in earlier this year, About Energy, uses data and software to expedite and enhance the battery development of its customers across the battery manufacturing, automotive and aerospace sectors.

While I am mindful and cautious of the challenges ahead, I am also extremely optimistic that 2023, with all the challenges it will bring, will also spark a new wave of entrepreneurship and an entrepreneurial mindset in the workforce that our world needs now more than ever.