In 2014, over 190,000 US entrepreneurs and small businesses exported to consumers on at least four continents. That is an absolutely astounding figure when you consider that the US Commerce Department reports that less than 1 percent of all businesses in America export. For the first time in history, nearly every entrepreneur and small business can use technology to reap the benefits of trade on a global scale, an opportunity traditionally open to only the largest multinational corporations. We are entering the age of micro-multinationals.
Traditionally, when an entrepreneur wanted to start a business they would reach out to friends, acquaintances and perhaps a bank in order to solicit funds; would find initial customers through personal contacts or a local storefront; and, complete transactions in cash or by check. Each of those processes has been fundamentally shifted through digital technology. Funding is now secured for fledgling businesses through crowdfunding platforms and online working capital lenders. Web storefronts are created from day one, and online marketplaces and marketing platforms are used to acquire and serve customers from around the world. Transactions are managed using online and electronic payments mechanisms as well as digital accounting services that simplify processes.
Here are some more amazing numbers from the eBay Public Policy Lab’s “2015 US Small Business Global Growth Report”, which further demonstrate the amazing impact that technology is having on entrepreneurs and small businesses. The World Bank has studied exporters in five upper-income European countries and found that 85 percent of small businesses that start exporting quit the effort by the end of the third year. That is a 15 percent success rate. Exporting is hard! On eBay, the success rate for US small businesses was 74 percent for 2010 to 2014. 85 percent failure versus 74 percent success.
The Internet trade landscape is also more open to newcomers. It is more inclusive. For example, the largest 5 percent of traditional exporters account for 82 percent of trade, but on eBay, the largest 5 percent of exporters account for just 55 percent. We also found that entrepreneurs and small businesses that trade more grow more. The businesses that exported 50 percent or more of their products grew 91 percent between 2010 and 2014, while the businesses that exported less than 50 percent of their products grew 58 percent over that same time frame. Pretty good growth for both of these groups, but those that exported more clearly grew faster.
eBay recently testified about the rise of the micro-multinational before the House of Representatives Small Business Committee. We wanted to inform policymakers about the tremendous positive socio-economic aspects of the Internet on entrepreneurs and small businesses. But, we also wanted to ask the Committee to foster policy changes that could further clear the path for US micro-multinationals. We asked the Committee to raise the US low-value customs “de minimis” threshold (the level below which goods are exempted from import duties and paperwork); modernize the global postal system; and tailor government export promotion programs to the needs of micro-multinationals.
Micro-multinationals continue to face barriers and it is incumbent on the US government to help open up new opportunities for them to grow, because entrepreneurs are the engine for economic growth that this country so sorely needs right now.
Brian Bieron and Usman Ahmed run eBay's Public Policy Lab in Washington, DC, examining challenges on the road to an open, global, transparent technology enabled economy.
This Week in Entrepreneurship Policy: Regulatory Burdens and Veteran Entrepreneurs
The Sharing Economy: Access Trumps Ownership
PDE’s Last Call
Policy Dialogue on Entrepreneurship Shifts to Growthology
Policy Dialogue on Entrepreneurship Shifting to Growthology
Looking Back on 15 Popular PDE Posts
Women Drive Startup Activity Higher for Second Straight Year