LEXINGTON, Ky. – Following a nationwide trend, Kentucky is experiencing a startup boom.
What You Need To Know
- Around 800 new business applications filed in Kentucky
- Lexington continues to be a popular location for startups
- Chamber CEO says economic downturns spawn creativity
- Stimulus money likely another reason for increase
Data from the U.S. Census Bureau shows business applications across the country were up a record 40% from 2019 as of Oct. 3, the highest level in 13 years, including for “high propensity” businesses, which are linked to firm creation and staff employment, according to an article in The Economist.
The recent surge in startups can draw a straight line to the government pandemic relief efforts, which prioritized income protection — stimulus checks plus high unemployment insurance — over job protection.
Per The Economist, these factors “gave people both the need (losing their job) and the means (greater financial security) to take on the risk of founding a business.” The census stats could be padded by people starting businesses to qualify for stimulus money in addition to a backlog of paused applications at the start of pandemic-related quarantine.
The pandemic and its related restrictions have made it easier to start digitally-focused businesses. The Census Bureau data shows there have been around 3.5 million requests for employer identification numbers in 2020, which is what a business needs to get started, up from 2.7 million requests in all of 2019.
There have been nearly 800 new business applications filed in Kentucky in 2020, a 32.2% increase from the 590 filed in 2019. Lexington has long been a hotbed for startups in the Commonwealth and leads Kentucky in “innovation capacity,” which is the ability to produce and exploit new ideas across a range of organizations or companies in an industry.
The Commerce Lexington economic development team determined the city’s innovation capacity is driven by access to human capital and knowledge creation. The Lexington-Fayette innovation index is 111.1, which is 30 points higher than the national average. “Startups and entrepreneurs located in Lexington also receive a number of advantages from the support of a cohesive and vibrant ecosystem of support organizations and community assets,” according to the Commerce Lexington “Guide to the Bluegrass” blog. “A strong entrepreneurial ecosystem is composed of many players offering support services including business and marketing training programs, mentoring programs connecting experienced entrepreneurs and emerging innovators, accelerators and incubators, youth education initiatives, peer networking events, and connections to fundraising resources and information.”
To capitalize on the city’s entrepreneurial momentum, Commerce Lexington has launched StartupLex, an entrepreneurial-focused and supporter-driven organization aimed at encouraging growth, education, and giving within the city’s ecosystem. As of Wednesday, Dec. 2, there were 83 available jobs with Lexington startups listed on LinkedIn.
A joint report by Commerce Lexington and the UK Office of Technology Commercialization called “Who Got The Money?” shows startup jobs in Lexington and the surrounding areas have an average salary of $61,450 for full-time jobs and employed 546 people in Lexington and Central Kentucky. The region’s entrepreneurial community created 121 new jobs, raised $51.1 million in capital, and generated $94.5 million in revenue.
“The Lexington startup ecosystem remains young but is strong and growing rapidly,” said Eric Hartman, associate director of New Ventures at the University of Kentucky Office of Technology Commercialization. “Lexington provides a strong environment for startups to succeed with access to a highly educated workforce, startup infrastructure and resources, and access to startup capital. We believe that Kentucky startups have the ability to compete nationally to solve problems of paramount significance to society.”
The Kentucky Cabinet for Economic Development has expanded its support of entrepreneurs and startups in Kentucky by offering a myriad of resources, such as a list of “accelerators” operating in the state. One accelerator is Lexington-based Awesome Inc., which provides a home for high-tech startups through its Awesome Fellowship program that provides mentorship and expertise to startups, along with access to a network of more than 60 experienced entrepreneurs, investors, and business community members.
Kentucky Chamber of Commerce President and CEO Ashli Watts said one reason for the increase in startups during the pandemic could be because it allows people and entrepreneurs the time to think and create solutions that become a reality.
“Unfortunately, the pandemic will have winners and losers,” Watts said. “Right now it’s going to be probably difficult for restaurants to continue with the indoor dining restrictions and not being able to offer outdoor seating in cold weather. The hotel and hospitality and drink industries have suffered. But businesses like Amazon have boomed and so have home delivery services for meals. Whenever there is a crisis or a downturn, it gives entrepreneurs the kind of the freedom to try to figure out the possible solutions and meet consumers’ needs.”
Commerce Lexington President and CEO Bob Quick said Lexington is often among the nation’s most recession-proof cities because of its diverse economy, well-educated workforce, and entrepreneurial spirit that drives innovation and creativity.
“Even in the face of the ongoing pandemic and economic challenges, Lexington’s entrepreneurial community proved once again that its ecosystem for startups is strong and growing through its recent economic impact survey that reflected robust figures for job growth, capital funds raised and revenue generated,” Quick said.
“The creativity of our business community has been on display all throughout 2020, as companies large and small continue to pivot their operations to meet the needs of the constantly evolving economy.”