At a time when businesses across the state are forced to close their doors or are scaling back operations, it seems counterintuitive to launch a business.
But is it?
As our economy dives back into a recession caused by the combined global forces of COVID-19 and the low price of oil, new businesses are more important than ever. High rates of business closures leave gaps in the market for newcomers ready to fill them, and for those that find themselves suddenly unemployed and facing an uncertain future, launching a business may be a good option.
Startups have long been an essential part of Alaska’s economy, responsible for 89 percent of net employment growth in the private sector. Over the last decade, startups in our state consistently added 4,000 to 6,000 jobs to the economy each year.
Although experts caution that accessing traditional capital will be more difficult than ever, many founders can launch lean, test the market, and look for funding in the future when they’re ready to grow. And, with unemployment rates at an all time high, there’s no shortage of workers looking for new jobs.
Nationally recognized startup accelerator Y Combinator is reporting 15 to 10 percent increase in applications for its summer program, which serves early stage entrepreneurs launching and growing their businesses. In Alaska, the opposite is true: economists are seeing rates of businesses hiring for the first time (most likely startups) declining by a third when comparing April 2019 to April 2020.
Entrepreneurship comes in many flavors, but can be sorted into two primary categories: necessity and opportunity.
To date, 85 percent of entrepreneurs in Alaska are “opportunity” entrepreneurs, which is about average compared to other states. However, economic downturns are associated with more necessity entrepreneurship, and rates of startups launched because of need may begin to increase.
Entrepreneurship born of necessity
Like many Alaskans, Seth Stetson was laid off from his job in March. Although returning to his position as director of Marketing and Business Development for Kaladi Brothers Coffee in Anchorage might be a possibility in the future, he didn’t want to wait to find out.
Instead, Stetson launched Anchorage Grocery, a special order, bulk food delivery service. Customers place online or phone orders throughout the week, and Stetson delivers their groceries to their doorsteps every Friday.
Anchorage Grocery is Stetson’s first business and is a direct result of the pandemic: he needed an income and a way to satisfy his creative drive. While watching consumer behavior change during quarantine, he determined that delivery is the future of grocery shopping.
Along with bulk online ordering and delivery, Stetson provides packaging and sanitation services with each order.
“I’m giving customers peace of mind by limiting the risk that their food is exposed to COVID-19 and other infectious diseases, bacteria and germs found in traditional public grocery stores,” Stetson said.
Before launching, Stetson thought that starting a business took years of planning, saving capital and working with banks. After he was laid off, he decided he was just going to launch and figure it out. It took him 2½ weeks to create a Shopify website, set up an LLC, get an EIN number, open a Sysco account, figure out product margins, and populate the website.
“It was really interesting to start a business this way, without having prior experience and doing it in such a short time period,” Stetson said. “I just keep moving forward and getting things done, picking off what I need to do next. And, I’m still adjusting to the fact that if I stop, the business stops. It’s just me keeping it going.”
Stetson says he’s getting a lot of feedback from customers that want more Alaska Grown options, which he intends to explore in future. Currently his local partners include Arctic Harvest, Copper River Seafoods, Kaladi Brothers Coffee and Molly B’s Bingerz cookies. He also closely tracks website activity to discern customer interest.
“Right now it’s all about the meat — ribeye, ground beef, seafood — along with rice, and some fruit and vegetables,” Stetson said. “These aren’t your grocery store quantities, this is stocking up: 15 pounds of ribeye, 50 pounds of rice. My customers want to fill their freezers and their pantries.”
Entrepreneurship born of opportunity
When Ross Johnston of Anchorage noted images of sourdough starter and bread flooding social media during quarantine — combined with a nationwide shortage of packaged yeast — he quickly launched a new venture: Ötzi Premium Sourdough Starter.
Sourdough, made by the fermentation of a flour and water mixture using the flour’s naturally occurring yeast, is a lengthy process of “feeding” the starter with additional flour and water for hours or days before mixing in other ingredients and allowing several hours of rising time before baking. When store-bought yeast is unavailable for bread, sourdough provides a tasty alternative and has captivated home bakers’ attention in recent months.
“I got really into sourdough sometime near the end of summer 2019, and toyed with the idea of selling starter at a Saturday market booth,” says Johnston. “But then I started thinking about how people pay more for unique and novel products, and how sourdough bakers are fascinated by the origin story of their yeast.”
Hence Ötzi, named after a mummified man who lived between 3400 and 3100 BCE discovered in a glacier in the Ötzal Alps between Austria and Italy. Ötzi’s stomach contents included processed wheat brain, believed to possibly have been eaten in the form of bread.
Johnston thinks the market is ripe for a premium product and likens sourdough to wine, with many varieties and prices points available. Hoping to tap into a customer segment attracted to a high-end product, his starter sells online for $24.99 on its own, or $49.99 for a kit that includes starter, water from glacial ice melt, and stone ground flour, along with instructions for upkeep and how to bake sourdough bread and pancakes.
Johnston hopes his products will appeal to people in the Lower 48, hungry for a taste of Alaska’s wide open spaces, pristine wilderness and good bread. He’s already reached a few out-of-state customers and continues to refine his product based on their purchasing preferences and product feedback.
Ötzi is one of Johnston’s many entrepreneurial endeavors. As he gauges whether or not the market opportunity he suspects exists is real, he’ll scale the company accordingly.
“This specific type of business is fantastic for right now. People are finding time to engage in lengthier rituals like baking sourdough bread and seem to have a greater affinity for the creative process,” says Johnston. “But any time you launch a business, whether you’re in the midst of a global pandemic or not, it’s risky.”
Both Johnston and Stetson are gambling that their risks will pay off.
For Johnston, that means seeing an idea scale to outside markets. For Stetson, it’s being in control of his future and providing for his family. And for Alaska, it’s the beginning of an economic rebuilding, the glimmering hope of a prosperous future.
You can watch Seth Stetson and Ross Johnston present more information about Anchorage Grocery and Ötzi on Wednesday, May 26, at 9 am via Zoom: https://alaska.zoom.us/j/92204612024.
Gretchen Fauske is the associate director for the University of Alaska Center for Economic Development, Board President for Launch Alaska, Vice Chair for Anchorage Downtown Partnership, and a Gallup-certified CliftonStrengths coach.