Leila Bengali: We had two major goals: to provide a more holistic view of what’s going on with the millions of online microbusinesses across the U.S., and to create a monthly index to give policymakers fine-grained information on their local economies, without having to wait months or years for government data. Given what we’ve learned working with Venture Forward, you can’t fully understand local labor markets and economies without knowing what’s happening with your microbusinesses.

William Yu: We know that a lot of small businesses got clobbered by the pandemic, but we also know that many of them have become much more focused on e-commerce. So this online activity is more important than ever. We all know that big companies like Google and Amazon are doing very well. But what about all these microbusinesses?

Yu: We studied three. Number one is the digital infrastructure in a region, such as broadband access. Number two is human capital, measured by things like levels of education and access to training. The third is access to financial capital, basically how easy can you get a loan. We found statistical evidence that all three of these factors are correlated with microbusiness formation and growth.

Bengali: I would hope that when policymakers in state and local government think about unemployment and other macroeconomic factors that they’ll also look at this index to make better, more informed policies, rather than having to guess how microbusinesses are doing. Governments across the country have created programs to help small businesses in the last 18 months. As we collect more data over time, we’ll be able to see what aspects of those programs are having the most positive impact on microbusiness activity. It will help governments invest using the money in the most impactful way, and get the biggest bang for their buck.

Yu: Like most people, we assumed that activity in cities like New York and San Francisco got hurt during the pandemic. Well, it turns out New York has done better than San Francisco in maintaining microbusinesses. At this point we don’t have enough data to give a solid explanation of why this is the case. That’s why we are excited to continue the partnership with GoDaddy. Over time, we’ll be able to tell a stronger story.

Bengali: As of March 2021, Washington, D.C., had the highest score. For states, Colorado had the highest score, of almost 110. States like Alabama, Arkansas and West Virginia were towards the bottom, with Mississippi the lowest with a score of 93.

Bengali: There’s an old joke about an economist who lost his keys one night but is only looking for them under a streetlight because “it’s the only place I can see.” The point is that economists are not very good at studying things they can’t see. We hope this project helps expand what they can see about the importance of microbusinesses.
 
Yu: Anything that fosters entrepreneurship is very good for a local economy. And in the 21st century economy, a $1 investment in internet connectivity might be more important than a $1 investment in another mile of highway. Now, it may cost a rural county a lot more to provide connectivity to everyone, but it might be the best use of those dollars. So, we hope this tool can help reduce all kinds of inequality of opportunity, including urban versus rural.