Jobless Entrepreneurship Increasing in Eastern Iowa
Editor’s Note: Sculpt is a student start-up located in the Bedell Entrepreneurial Learning Laboratory on the UI campus.
When Josh Krakauer left the University of Iowa last year as an eager graduate ready to enter the work force, he didn’t blast prospective employers with resumes.
He didn’t endure awkward interviews in executive suites.
Krakauer joined a growing number of job seekers these days seeking to enter or reenter the work force by deciding to become his own boss. Partnering with two UI classmates, Micah Kulish and John Doessel, the trio launched Sculpt, an Iowa City-based social media marketing firm committed to helping company heads manage social media accounts and use them to bolster business.
Starting his own business rather than joining an already existing company was a risk, Krakauer said. But startup costs were low and operational expenses have stayed small.
And with just six part-time employees helping to manage Sculpt’s dozen accounts, Krakauer said, the risk so far has paid off.
“In our market, there are so few people dedicating themselves to the small business market and doing social media marketing that it just made sense,” Krakauer said. “And it’s been going really well.”
Experts and independent studies have reported that the entrepreneurial path Krakauer chose by creating a small-scale start-up is a growing trend. A Kauffman Foundation report, “Jobless Entrepreneurship,” for example, indicated the number of businesses that hire employees has dropped since 2008—even though entrepreneurship has increased.
According to the report, more Americans call themselves entrepreneurs now than at any time in the past 15 years. But many of them are doing it alone rather than with employees.
Carl Schramm, president of the Kauffman Foundation, expressed concern about the trend in a news release introducing the report.
“Far too many founders are choosing jobless entrepreneurship, preferring to remain self-employed or to avoid assuming the economic responsibility of hiring employees,” Schramm wrote. “This trend, if it continues, could have both short- and long-term impacts on economic growth and job creation.”
But Krakauer sees it differently. Many of the “jobless entrepreneurs” are innovators shaping the future economy, he said.
These low- or no-employee companies of today could yield an abundance of jobs down the road, he contended.
“You have these bright young entrepreneurs who are deciding to risk a lot to disrupt an industry, and that can only lead to amazing things in the future,” Krakauer said. “It’s promising, and I think we need more people to follow that path.”
‘A different world’
David Hensley, interim associate vice president for UI economic development and executive director of the John Pappajohn Entrepreneurial Center, said the employment landscape is changing, and the shift in job creation is here to stay.
“It’s just so much different than it was 20 years ago when you opened a standard brick-and-mortar store and hired people,” Hensley said. “There are so many more opportunities and strategies that businesses can take that are effective for them and create economic opportunities.
“It’s a different world we live in.”
Hensley said that while entrepreneurship is changing and start-ups are launching with few if any employees, he doesn’t think the trend is necessarily bad for the economy. Some of today’s lean start-ups will be tomorrow’s job creators, he said, and the more that get off the ground, the better.
“It’s going to be a different type of job growth …. We will need to see lots of start-ups,” he said. “They will turn into the major employers five to 10 years from now.”
With the globalization of business and cutting-edge technology, many industries and existing companies need fewer employees and are downsizing, Hensley said. That means trailblazing entrepreneurs are becoming increasingly central to sustaining the job market, he said, even if the businesses are only around a few years.
“Some industries are research and technology based, and you can form a company and work in that company for a few years and then get acquired,” he said. “It’s a different kind of business model, but jobs will be created.”
And those jobs and new enterprises will help support the economy through the services and resources they need to get going and continue growing.
“The entire community and economy will be positively impacted because you will create economic vitality and energy as you have more and more start-ups in your community,” Hensley said.
Moving toward 'a new economy'
Troy Miller is no stranger to entrepreneurship. He owns both Naomi’s Kitchen and Isaac’s Creamery in North Liberty. But Miller, with co-owner Josh Cramer, is launching his first Internet-based start-up that relies mostly on a handful of contract workers.
Koala Pay is a smart phone application that allows customers to pay at participating businesses with their phones and lets businesses send customers personal messages, rewards, and deals. The application was approved in the Apple store about a month ago, and Miller said he’s been signing up merchants in Eastern Iowa since.
While Miller pushes the product, Cramer has focused on the development through his Iowa City-based business Cramer Development. Miller said the developers are considered temporary workers.
“We can ramp up and down depending on our needs,” Miller said. “I don’t have any dedicated employees in this business at all.”
Miller said he has seen the number of lean start-ups explode recently, and he thinks they’ll continue to do so as the nation enters “a maker’s economy.”
“This will upset the job market, it will upset the economy,” he said. “But it’s all on the way toward a really new economy that is coming about.
“You must remain flexible and grow.”
Not all of the new lean start-ups in the Corridor are technology driven. Amie Havlik said she recently started her one-person business in Ely, in part, for job security and to be her own boss. Through Simplified Transitions LLC, Havlik helps the elderly organize and make small and large transitions—including moving homes—with the help of contract workers.
“I do feel that because of the economy in the past few years, entrepreneurship has become a trend,” she said. “I don’t know if it’s going to be big for decades, but right now it’s really common.”
One new business owner said he thinks part of the recent entrepreneurial push, especially those new businesses dealing in the technology realm, has to do with the simplicity of launching an enterprise. Alex Frazier is a co-owner of the Cedar Rapids-based RecBob, a year-old online application that manages recreational sports teams—simplifying team communication, payments, schedules, and substitute lists.
“The barrier to entry in a tech start-up is quite a bit different than a brick and mortar shop,” he said. “All you need is an Internet connection, a coffeeshop, and an idea, and you can be a business owner.”
Frazier said that even though many new businesses are starting lean—RecBob has just six employees right now—he expects the overall surge in entrepreneurship to equalize the job creation.
“Instead of one corporation employing a lot of people, you are seeing a lot of start-ups,” he said. “And I think it will balance itself out.”