Transcript

Elizabeth: People are so out of touch with what’s really going on in the small business economy, it’s so important. And yet people have no clue what it really looks like, what it’s like to be a small business owner. So that really gave us some urgency.

Didi: It’s the people ops podcast from Zenefits, the only show dedicated to small businesses, sharing stories of pivotal people, moments. I’m your host Didi D’Errico. Elizabeth MacBride is a freelance writer who specializes in business journalism with an eye on finance and entrepreneurship. While working in the middle east.

She met Seth Levine, a managing director for a venture capital group and a fellow small business enthusia. Together latest cited to write a book about small business owners, whose stories weren’t being told the book titled the new builders face to face with the true future of business shares, fascinating insights on the importance of small business.

And the alarming downward trend of entrepreneurship in America, Seth and Elizabeth joined the show to discuss how to level the playing field for new entrepreneurs and why the future of small business is so crucial to the American economy. But before we jump in, let’s find out what is it about small business in particular that motivates each of.

Elizabeth: I have been a business journalist for a long time. And the truth is that although I’ve interviewed many of the most famous business people in the world and written lots of stories, but I finance and numbers. And I understand that part of the economy very well. My favorite stories to write have always been about small business because they are wonderful stories.

I just, I love people. I love talking to people and I love. The relationships they build with the places and the people around them. 

Seth: Yeah, I’ve always been really interested in the backstory behind businesses. And I love hearing those stories. And I realized for me personally, that’s what motivates me venture.

Isn’t a really effective medium for supporting a broad set of small businesses, but really at its core, what motivates me is working with businesses when they’re smaller. I love that. And so I’ve always enjoyed working with entrepreneurs around the world and working with entrepreneurs that are pursuing different types of businesses.

Didi: A compelling quote from their book, says entrepreneurship in the U S has declined over the past 40 years. And as we narrow our definition of entrepreneurship, we narrow our opportunities and we limit our economy. Let that sink in for a moment. According to Elizabeth and Seth, the solution to this decline is the next wave of small business owners or what they’ve dubbed the new builder.

Unfortunately, these new builders face incredible challenges. 

Seth: One of the things that was interesting as we did our research for the book is that it turns out that the people that are starting businesses in the United States today are not the people that are getting headlines. And I suppose, as the economy and the country has become more diverse, it shouldn’t surprise people that people starting new businesses are also diverse, but it, it does, but just because it’s not the mental image that people have, but it turns out that people who are starting businesses.

Tend to be female. There are many more people of color who are starting businesses in particular. Black women are starting businesses at the highest rate of anyone in our economy right now. And in fact, we believe that based on data that we crunch from the SBA and a couple of other sources that white males are actually the minority now business owners.

So that’s not to say there’s anything bad about being a white male business owner, but the truth is. That the majority of new businesses are started today by women and people of color. We call these people the new builders, because we wanted to give them sort of a name and almost like an agency and something to rally around.

And the new builders really are the future of our economy. If we’re going to continue to be successful, particularly have a successful entrepreneurial economy, we’re going to rely on new builders and we need to find better ways to support. 

Elizabeth: And I would just add to that. We spend really chapter two in the book, helping people take a look at the importance of entrepreneurship to the economy, because we’ve really focused on the idea of big and scale and bigger is better.

And Amazon is called Amazon, right? We’re in a moment of celebrating size. And in fact, we not only need small things that grow big, but we need small things. We just need them. We need small business because they, in their turnover and in their innovation, in their creative destruction and all the things that small businesses do at that end of the economy, they make our economy dynamic.

And that’s what has really set America apart from the rest of the world, enabled our economy to grow so fast, enabled us to be so innovative is that we have a very dynamic economy where it’s not hard to start a business. And historically it has not been hard to fail at a business, although that may be changing.

Didi: Now let’s jump into the conversation, starting with the urgent need to remove obstacles for entrepreneurs.

Seth: We could spend hours talking about the obstacles and really it, to some extent, a lot of the book touches on some of these obstacles, whether it is. Access to mentor networks, access to capital access, to just other types of help forming businesses and getting started access to things like benefits and healthcare, which is a huge impediment to new business starts in our economy.

These things all come together to prevent people who have ideas from starting their businesses. And I think if there’s any stat that really stuck out to me, In the book more than others, to some extent it is that the percentages of new businesses that are started by people who are in the top 5% of the wealth ladder, if you will, in the countries, it’s surprisingly high.

And I hadn’t realized that I’d always thought about entrepreneurship as being a path for anyone. And it’s part of this kind of American mythology, this idea that one. Can just pull themselves up by their bootstraps and overcome whatever it is there. That was their circumstances. And I’ve deeply believed that because I’ve thought it to be true, but that’s been dying in the United States, children who were born 25 years ago in the bottom 25% of the income bracket had a 25% chance of ending up.

Twenty-five percent, but basically if you were born with more, for more modest means you had a reasonable shot at ending your life at the top of the economic stack, that’s totally changed right now. Now, if you’re born in the bottom 25% of the, of the wealth scale, you have only a 5% chance of getting into that top 25% by the time that you die.

And so we’re losing this dynamism, we’re losing this opportunity and the issue isn’t that there’s a talent gap. There’s plenty of people from across the associate. Economic sphere that are incredibly talented. It’s that there’s this massive opportunity gap. And I think that many of us don’t see it because we’re not looking in the right places fundamentally.

That’s why Elizabeth and I wrote this book and why we want people to go out and buy it and read it is to really understand that there is a massive opportunity gap that we’ve created in our economy. And we need to, I have this 

Elizabeth: memory of when Seth and I’m not even sure we had pitched the book yet. But the pandemic had just hit.

And it was like Thursday and Friday. And the Congress had passed that big PPP legislation. And it was the Friday night and I was like lying on my couch. I was actually watching tiger king. And I was like, we were like, this is a disaster. Right? Because Seth and I knew from our research that the way that Congress had designed the PPP, it was not going to reach the businesses that were closing.

Cash like literally to stay afloat and right. The disruption for a waitress who’s living paycheck to paycheck. If her employer closes the restaurant owner, doesn’t have money to keep just like we’re talking about putting food on people’s table. Literally. So Seth and I, we wrote this op-ed so fast, like in a day.

And I called a friend of mine who was an editor at CNBC, and we got it on to CNBC, which was the biggest site that I had the direct line to. And we said, Congress, you are just missing the boat. Like he’s got to revise the PPP. And then a couple of weeks later, I heard from Tim Cane’s chief of staff saying, Hey, we used that to help reshape the legislation.

We really felt like we were making a difference and we had the sense that we needed to keep going, because these mistakes happen. A lot. People are so out of touch with what’s really going on in the small business economy. It’s so important. And yet people have no clue what it really looks like, what it’s like to be a small business owner.

So that really gave us some urgency. 

Didi: We’ve hinted here at the kind of the capital access and Seth, you started and run a venture capital company. You talked to me about the fact that when it comes to funding, new companies, 80% are bootstrapped less than 20% get bank loans. And just 1% go to people like you and get venture funding.

Those numbers are even more skewed against entrepreneurs who are female or people of color. So talk a little bit about what do you want to change and where are the tentacles that you reach out to make it? 

Seth: What’s interesting to think about is just how ineffective the venture model is for broad-based economic development.

It does a good enough job, or maybe a great job of identifying massively disruptive businesses and at least some number of venture capitalists and venture capital firms do really well with that. And those businesses that are spawned by the venture model can be very impactful. It’s not that economy is a poor economy.

It’s just. The venture model doesn’t lend itself to broad based economic development. And in the venture world, we talk seriously about chasing unicorns, right? Building businesses that have values of greater than a billion dollars. The reason is because the vast majority of venture funded businesses fail.

And so venture capitalists make their money by investing in a small number of the highly successful businesses. But what we talk about in the new builders is the need to not create unicorns. We need to create what Fred Swanick or calls camels and they’re. Mythical for starters, but they’re the workhorses of the economy, right?

These are businesses that are sturdy and Hardy and able to adapt and frankly able to survive for long periods of time, you know, and that’s what really builds economic development more broadly. And so we believe that’s what needs to happen. And really the magic there happens in the middle. Right? It’s not.

The 1% of businesses that take money from venture capital, it’s everything else, right? In particularly these 80% that you referenced that don’t take money from anywhere. And then we really would love to see more innovation in this middle group as well, where there are some new forms of financing, revenue based or profit based investing.

Bridge the gap between, uh, debt and equity that are really fascinating. We’d love to see more money being put into that. And then we’d like to see more money put into technical assistance. We highlight so many different innovative financial models in the book, but essentially every one of them shares one thing in common, which is that they provide some form of mentorship or what’s known in their world as technical assistance to these companies.

And what we found is that is an incredibly effective way to help businesses. Succeed. So 

Didi: Elizabeth, you’ve spent your career writing about business leaders and talk about the disproportionate attention, but how open do you think the media establishment is in general to get behind your vision of sharing these new builder’s stories and getting behind pushing the power to get the kind of attention that we’ll need to make these sort of things.

Elizabeth: The short answer is not at all willing. This has been a mountain I’ve been trying to climb for a long time. And in fact, because I got frustrated with it, I started my own publication, which kind of was the backdrop to a lot of the work that went into the new builders. I run an online magazine called times of entrepreneurship, which really aims to cast this broader lens on a small business and entrepreneurship to take back the word entrepreneurial.

So that it belongs to a broader group of people with the idea that sharing the stories helps change the broader narrative. And that’s really what journalism has the power to do when it’s done well. But really it’s only by being subversive that I have been able to get any coverage of small business into big business outlets.

I would say that a hundred percent has been a struggle the entire time. The reason I pour my heart and soul into this work is that I really believe that the only way you make progress in the world is through story. I believe that stories create the emotional space for people to change and that journalistic stories that are rooted in fact, and that include context like enable positive change.

And so that’s why I tell the stories of the new builders and that’s what I hope many people will listen. Then in turn, tell the stories and invest. New builders. So your 

Didi: quote about stories are powerful because they give you emotional space to make a positive change. It’s like, why doesn’t that play out?

Why do people say, yeah, that’s nice. And pat you on the head and just move 

Elizabeth: on. I actually think it is changing. I think it’s on the verge of changing. I do think maybe since the eighties we’ve been in this kind of like era, if our culture that’s very, data-driven the philosophers call it gamification and these things come in cycles and I think we’re shifting out of it.

I do think this generation will see the world differently and embrace. Values, other than those that can be quantified by these numbers, which we all should and do understand that numbers can be very deeply why they could be liars. Right. Numbers can deeply lie. 

Seth: And one of the challenges is that when we’re, when you look at numbers, you tend to focus on averages and averages.

You lose all of the context, right? All of this rich, amazing storytelling that happens around the edges and you focus on the thing that’s in the middle. And in most cases, the average literally doesn’t exist. It’s just a fabrication of numbers. And so I think that’s one of the things that we’re really trying to do with the book is to, is to put a face.

And a story to what we’re really talking about in a way that combines talking about facts and figures and some things like that, but mostly focuses on the actual stories of new builders, because I think that’s just getting lost in the narrative throughout her 

Didi: career. Elizabeth has interviewed dozens of entrepreneurs about how they’re making it against the odds.

So I asked her, what are the winners doing differently that helped them beat those odds. She answers with a story that will inspire you. 

Elizabeth: So the story of dinars Mazarra is the narrative backbone of the book. And it starts with the journey of her family from the Dominican Republic through Puerto Rico. And she came to Massachusetts.

They were living in Lawrence, Massachusetts, working at factory jobs when the great recession. And that was in 2008 and she, her husband Andreas lost his job. She still had her job at the Samsung factory. She had a newborn baby and they didn’t have enough money to pay their bills. So she found herself in a rented house staring at one of those sort of terrible drop ceilings.

And her mother stopped by to give her food stamps. Her mother said, I know you’re going through a really hard time. And handed her a $37 in food stamps and the NARAS thought, what am I going to do with this? It’s not enough to buy groceries for a week. I’m not going to be able to feed my family and. She heard in her head make fun.

She called her aunt who had a reputation for baking Flon and her aunt gave her the recipe and she made a batch of Flon. The first batch was ruined. It was terrible. So she’s still by the stove kind of crying, but then she decided to try again. And so the second batch was beautiful. And she sold it on the break table at Samsung for $6 a slice.

And after a month of doing that, she figured out she had a business. And from that business grew sweet grace heavenly cakes, which is named after her daughter. And is now a pillar of the Dominican community. 

Didi: So would you say it’s belief if you were to nut that out in terms of what are the winners doing different?

I mean, that’s a, that’s an extraordinary story of being with your back against the wall in every possible 

Elizabeth: way, right? Yeah. I think to net that out, and this is what I learned from Dinara is over many interviews and knowing her, I think it boils down to persistence even more than belief, but persistence in kind of a positive way.

It’s not saying. I’m going to fail and fail again. It’s exactly what Silicon valley does so well iteration, but she thinks of it differently. She thinks of her business as a baby, and you have to teach your baby how to first take steps and you have to teach them to eat and sleep. You have to teach them everything.

So growing a business is like that, right? It’s not going to be fully formed or successful right away. You have to help it grow. 

Didi: On this show, we love to talk about how small businesses are supporting and engaging their employees and their communities. Since Elizabeth and Seth have frontline knowledge of so many small businesses, I couldn’t help asking them.

What did they noticed about how these businesses, the ones that are thriving, treat their 

Elizabeth: people. In our research. What we discovered is that small businesses do engage with their employees differently. First of all, they tend to employ people who don’t necessarily fit the rubric or the algorithms that the big companies use for one thing.

And so they’re employing people that may be. Are on the edges, which is not always the best thing for the small business, but it ends up being a good thing for the labor force, because I think what you, small businesses do a ton of like on the ground training of people and not only training as in skills, but also training and how to be a worker in general.

So small businesses carry this tremendous load in ways that are not recognized for the labor. The economy. And I think we could do a much better job of recognizing and valuing and supporting that role. And the example that I like to give is small businesses working around the Bob Marshall wilderness in Montana.

And we really highlight them playing a role in the political advocacy that helps keep the wilderness a lot. Because the big businesses aren’t doing that work, the small businesses really are the political force there. So that chapter is about that. But one thing we didn’t write about, but that is part of the story is that their small businesses also employ young people and really do this incredible job of mentoring them and supporting them and introducing them into the value.

That underpin that whole way of life. And I saw that over and over again, right. As the kind of 50 year old cowboy was mentoring these sort of 18 to 20 year old men who had made the decision not to go to college and they could have easily, I think, drifted off into a life path. That was not a great one.

But instead, what they were doing is learning how to work really hard in the wilderness, under the guidance of this older guy. I love 

Didi: that. So let’s switch gears to kind of some final takeaways here. We call them pivotal people moments. And it’s a relatable example that you uncovered maybe in the process of writing your book, that inspired you.

What story would you love to, would you love to share here that you think readers could take away, maybe iterate and share with other people? 

Seth: So many great new builders that we talk about in the book and each of them have. Sort of th their own story. And it’s hard to pick just one. And Elizabeth talked about DNRs, but if I were to, was to pick another one, it’s Jasmine Edwards.

And I like this story in part, because she’s a successful entrepreneur, but the business that we talk about in the book of hers was not successful. It didn’t work. And her business, the business idea, actually in this context, it isn’t even that important. And a platform for placing substitute teachers into schools, which is actually a really big and interesting problem fraught with regulatory challenges and other licensing issues, which make it actually really ripe for disruption and ripe for a platform like our business.

But it really stands out because of, uh, her sheer grit and determination and what she went through to try to see this dream become a reality. And she’s just an incredible. Amazing person. She just wrote us a, an email recently. She’s now she’s writing a book of poetry and was accepted into this poets Institute is really a remarkable woman.

But the, but in the story that we tell in the book, which is about the founding of this substitute teacher platform called ice subs, she basically, she risked it. All right. They gave up. She and her husband who had, they had several kids at the time, they gave up their apartment, moved back into with her parents and into one bedroom at her parents’ house with three kids.

And then she joined this program called digital and divided. It’s one of the platforms that we described in the book, that’s helping entrepreneurs be successful, but the catch was that the programs in Atlanta and Jasmine lives in Florida. And so she would. Sunday night, Monday morning, she would drive 400 miles up to Atlanta, participate in the program.

Her husband would take care of the kids, and then she would drive back for the weekends and it’s this incredibly grueling schedule, but it was just, it just shows that kind of pit that, that grit and passion, determination that so many entrepreneurs have. And that really. I that, that stood out to me cause it’s and we actually, we talk about it in the chapter on grit and we talk about it standing out, even amongst the stories of incredibly gritty people.

But if Jasmine can do that, I want people to hear that story and be inspired. Hey, if she’s done all of that, you know what? My entrepreneurial journey may not be quite so challenging. And maybe what I thought would be insurmountable. Feels insurmountable right now, actually isn’t if I think about it through a slightly different lens and that’s in part why we included that story, because we, we wrote about a lot of these stories because we want to inspire people.

We want people to know. Are you excited about it? 

Didi: Is there something in there in terms of small businesses and helping teach their staff about resiliency that you’ve 

Elizabeth: noticed? I absolutely think that the small business owners that we interviewed for the book and the ones that I’m continuing to talk to.

Are surviving and thriving because they see the value in things that big businesses don’t, and that includes people. And many of them do take risks on people that aren’t obvious they take a risk and they can recognize if there’s chemistry and a connection there that will enable skills to develop. And enable the skills to be transferred and values to be transferred.

So I do think that’s a key advantage of small businesses that they may not recognize themselves. Go with your gut. I think go with your gut is something that the big business schools teach big business leaders very effectively. And for all of the reasons we’ve been talking about small business owners have been taught that they’re not as worthwhile.

You need to follow this pattern. You need to follow that pattern. It usually comes down to just trust your gut, right? Trust your gut about the people you’re hiring trust about how to teach them and lead them along. Trust your gut about who you can trust. I think that’s a key theme. That’s very deeply underlying.

Didi: In wrapping, you guys talked at the beginning of the call and kind of throughout about optimism. And I love to understand what are you most optimistic about for small businesses and for new builders in 2021, 

Elizabeth: I am optimistic that we have a new mindset. Toward small business and are beginning to recognize their value.

And then in turn that will lead to real policies to support them. And I would just encourage the listeners of the podcast to be part of that because small business owners themselves have not a lot of time, but to advocate for the community to explain what you need to connect with them. Platforms. So people can go and find these communities to be part of communities of them, small business 

Seth: owners.

I think the other thing that I’m personally optimistic about is kindness. I feel like perhaps COVID has forced us to rethink priorities and to rethink the way that we interact with our communities. And it’s certainly made people think differently as they walk into the grocery store, for example, but the people that work at the grocery store who stood there and did their job.

Despite the fact that we, we didn’t know what COVID actually was at the time and how contagious it was. And they held the line. Right. As, just as one example, there were millions and millions of examples. And I feel like perhaps there’s a greater recognition by individuals of the people around them. Right.

These aren’t. Nameless faceless people that stock the shelves or stayed open or figured out how to keep their restaurant open. But instead these are members of our community and people stepped up and did what they could. They bought gift cards to help support them. They ordered takeout much more frequently than they otherwise would have.

They thanked people at the grocery store for work for working there. They thanked first responders or for the people that were staffing the, the testing facilities and ultimately the vaccination facilities, like maybe. Maybe we’re entering into a, an era of slightly more kindness and more love and appreciation for each other.

And I think that’ll, that will really be helpful to new builders into our overall economy. If we could all be just a little bit kinder 

Didi: I’m Didi and this was PIVOT. If you want to learn more about inspiring people, operations stories like Seth and Elizabeth’s, check out zenefits.com/pops-podcast.

Or you’ll find bonus resources, profiles, a link to Seth and Elizabeth’s new book and even a link to order our new book titled you guessed it, people operations. Also, if you have questions you want us to answer on our show, check out the link in our show notes below and we’ll get it covered.