24, January 2022
In this blog we’ll take a look at the prospects for entrepreneurship in Alberta in 2022.
First of all, though, we’ll revisit why startups are important in the economy. Startups can be seen as experiments which introduce new ideas, new technologies and business models to the marketplace. The market then decides which of these succeed and which fail as new entrants compete with existing firms. History shows that most radical ideas come from new players rather than existing companies. For example, it is no surprise that a new entrant (Tesla) led the move for electric cars, rather than incumbents such as Ford or Toyota. Having a consistent supply of new ideas is essential for a dynamic growing economy and startups are a major source of these and the driving force for creative destruction.
So, what can we expect in 2022?
First of all, we can expect a lot of startups. Measuring the number of startups is a tricky business. When does a startup start? Is it when the business is registered? Is it when it hires its first employee? Should we count the number of people involved? What about non-registered businesses? However, by all of these metrics 2022 looks very good for Alberta, building off a strong 2021. Alberta showed 3,930 new business registrations in November (latest available), up 7.7% from 2020. The Global Entrepreneurship Monitor (GEM) showed that 20.1% of the adult population was involved in some form of entrepreneurial activity in 2021, the highest level in rich countries, up 29% from 2020. The US showed similar large increases, with startups increasing by 23% during the first 9 months of the year. We don’t really know why the activity has been so strong. One reason is probably finding new opportunities. The GEM survey showed that 67.1% of Canadian entrepreneurs saw new opportunities as a result of the pandemic, the highest rate among high income countries and a big increase from the previous year. Another might necessity, as so many people lost their jobs in 2021.
Who will the new entrepreneurs be? Based on previous years, the largest age group will be 25-34. They will be highly educated – about 20% will have a degree, and almost a quarter will have graduate experience. About 45% of them will be women. One thing to look out for: will there be older entrepreneurs? Anecdotally many baby boomers have retired early due to COVID and it will be interesting to see if they decide to start something.
What will their new businesses be? Again, based on previous years, they will be in business services (30-35%), consumer services (30-35%), manufacturing (around 25%) and extractive services (around 10%). The tech sector will be very strong. Edmonton was recently named the fastest-growing tech sector in North America. Innovate Edmonton reports that there are more than 930 start ups and scale ups in Edmonton. Calgary is home to roughly 700 tech companies, according to Platform Calgary, and has plans to reach 3,000 by 2031. There have been four unicorns in Calgary in recent years– startups with a market value of $1 billion. These are Benevity, Parvus Therapeutics, Shareworks and Enverus Intelligence Research.
Will they export? According to GEM, 2021 saw a big rise in startups that generated 25% or more of their income from exports.
What motivates entrepreneurs? There have consistently been three main motivations for entrepreneurs in Canada: a desire to change the world, a desire to build great wealth, and the need to earn a living. A lesser motivation is the desire to continue a family tradition.
What challenges will they face? Finding financing is always the biggest concern of startups, but in 2022 it is likely that finding qualified staff will also be a major challenge. According to the Alberta government, by December full time and part time employment was back to pre-pandemic levels. The job vacancy rate was 4.7%, which equates to about unfilled 100,000 jobs in Alberta. It is also likely that supply chain disruptions will also affect many entrepreneurs in 2022.
What can history tell us? During the Spanish flu in 1918/1919 startups boomed from 1919 in the middle of the pandemic onwards. This was very likely for similar reasons we see in the COVID-19 pandemic – entrepreneurs seeing new opportunities.
All of this will be underpinned by robust economic growth. The Conference Board projects Alberta’s GDP will grow by 6.1% in 2022.
So, all the signs are pointing towards an awesome year for entrepreneurs in Alberta in 2022.
This blog first appeared on www.thecis.ca