In the Startup World, You Want to Be a Camel
The 2022 Greater New Orleans Startup Report explains why, amidst no shortage of good news.
Keith Twitchell spent 16 years running his own business before becoming president of the Committee for a Better New Orleans. He has observed, supported and participated in entrepreneurial ventures at the street, neighborhood, nonprofit, micro- and macro-business levels.
Some major gains and a few mixed messages highlight the 2022 Greater New Orleans Startup Report, recently released by the Albert Lepage Center for Entrepreneurship and Innovation at Tulane’s A.B. Freeman School of Business. Now in its fourth year, the report details results from a survey of approximately 150 startups and small businesses in the 10-parish region.
The report paints a landscape that is clearly recovering from the pandemic, yet is altered in ways that are probably permanent. Notably, the survey was conducted in first quarter of 2022, soon after the major buyouts of 2021, whose effects continue to ripple across the startup scene.
The workplace itself remains a front-and-center issue, and here the survey results are somewhat contradictory. On one hand, more than half of the businesses who responded now offer a remote-working option — a first for the study. On the other, numbers for respondents working at home dropped from 48% to 32% year-to-year, fewer than the 38% back working in the office.
“We’re starting to see that businesses want to get back to more in-person interaction,” observed Emily Egan, director of strategic initiatives at the Lepage Center. “They’re not going fully back to in-office, but they’re not going to be fully remote, either.”
While this is good news for the commercial real estate sector, Egan noted changes from the pre-pandemic leasing model. Many firms want shorter-term leases, and the use of co-working spaces is increasing.
“Companies are looking for more flexibility,” was her analysis.
Meanwhile, the workforce also wants flexibility, including remote-working options. Egan reported that “companies are looking at how they can make it more enticing for people to come into the office, like on-site bike storage and free catered meals.”
She also noted that remote work doesn’t necessarily mean working from home; many employees are taking longer vacations or visits to family while building work time into their days away.
One major positive cited in the report is that startups enjoyed significant increases in equity financing. Fifty-nine percent of startups reported raising some type of equity capital, up from just 36% in 2020. Large-scale investment showed similar growth, with 62% of those who obtained capital attracting upward of $1 million.
“That’s a 20% increase in the companies that have raised more than $1 million,” Egan pointed out. “That speaks to the maturity of the market. And the majority of the capital came from outside the region, which is a real validator.”
At the same time, the amount of local-source investment increased, something Egan felt could be attributed in part to reinvesting of the 2021 exit cash-outs.
“Exits are a really important maturation factor in the development of an eco-system,” she commented.
One unfortunate damper in the investment news is that businesses founded by Black, indigenous and people of color (BIPOC) experienced a decline in access to equity financing, an unfortunate trend that mirrored national data. This makes the recent commitment from the U.S. Treasury of $113 million for new loans and venture capital investment in Louisiana even more important, as the funding is focused on economically disadvantaged individuals.
More good news is the report’s findings that gross revenues among survey respondents grew from $1.56 million in 2020 to $2.31 million in 2021, a 67% increase.
“It’s really promising to see this, in terms of how companies have been able to weather the pandemic, economic uncertainties, even a hurricane,” observed Egan.
While 2021 saw the first “unicorn” in New Orleans (a startup selling for $1 billion or more), Egan echoed the report’s suggestion that the camel may be better suited for the local entrepreneurial scene. “Camels represent resilience,” she said, “being able to sustain and grow in adverse conditions. In New Orleans, you don’t have this ton of capital, this ton of talent. You have to model yourself to withstand the economic shocks.”
Unicorns may be much flashier, but they are fundamentally a fantasy. Camels are real, and so are camel-like results: surviving, growing, succeeded no matter the environment.
“We should celebrate all the wins, not just the big ones,” Egan concluded.
Keith Twitchell’s blog, “Neighborhood Biz,” appears every Thursday at BizNewOrleans.com.