A New Generation of Startups May Be on the Horizon

Holding Out Hope

At a time when the country has been bombarded with a pandemic and an ensuing economic crisis, some are holding out hope for a better future and are launching companies. Though it might seem paradoxical, past recessions have spurred a wave of innovation in the startup sphere, and the current economic downturn appears to be no exception.

Layoffs have been rampant at big tech companies like Uber (UBER) and Lyft (LYFT) as well as at large pre-IPO tech firms. Many engineers and product employees have had tech-industry jobs at their fingertips for the past ten years, but are now out of work and may be looking to start their own enterprises.

For example, the startup accelerator program, Y Combinator, has seen applications for its summer program spike by roughly 20%. The company’s free online school is also seeing increased interest, with over 1,000 sign-ups each week.

A Big Moment for Shopify and Wix

Companies that help people start their own businesses are also booming.

One such company is Shopify (SHOP), an online platform that helps entrepreneurs to sell their products. Ecommerce has seen significant growth in the US, rising from 4% of total retail in early 2010 to 11.4% during the fourth quarter of 2019. That figure shows just how much room for growth is available in the online commerce sphere. The combination of more people starting their own businesses and more people shopping from home could give Shopify, and its creators, a huge boost. The company already serves over 1 million sellers, but some analysts predict that number could double or triple.

Wix (WIX), a company that helps people create websites, has also seen an increased demand for its services. This is due to entrepreneurs starting new companies, and existing businesses ramping up their online presence. During the month of April, Wix saw its new registered users increase by 63% to a chart-topping 3.2 million. The company’s total revenue is up 24% year over year.

Facebook Launches Online Shopping Platform

Facebook (FB) has also noticed the boom in new businesses and the demand for e-commerce platforms. On Tuesday, the tech giant launched Shops, a way for companies to set up virtual storefronts on Facebook and Instagram. Third-party platforms, including Shopify, BigCommerce, and Woo will help power the new Facebook service.

Facebook will not charge merchants to set up their shops. Instead, businesses can buy ads for their stores, and Facebook will take a cut of purchases when buyers check out. Facebook will also connect Messenger, Instagram, and WhatsApp to the service so businesses can communicate with customers. Facebook hopes the new initiative will be profitable for the company and will help struggling small businesses as well as new startups.

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