The Rise of the Incredible Cell-Sized Enterprise

Posted on 01. Jul, 2012 by in blog, Coworking, SOMA, Startups

In starting my own small company, I’m joining the ranks of millions of “microenterprises” portending epidemic changes in the business environment.

When Facebook went public in May, I had a moment – and I bet you did, too.  I found myself in one of those wistful reveries, wishing, gee, damn, if only Mark Zuckerberg had been my boss, so I could have had a piece of that windfall.  But then I remembered.  I’m already working for the best boss in the world.

My boss is me.

Yep, after 20 years of working for someone else, I’m now working for me.  The LLC papers arrived from the CorpNet filing service last week, replete with my very own company stock certificates and, oh yeah, the very own company embossing stamp.  You can’t get more official than that.

I’ve thought this made my company special, in the way a parent regards a child they’ve brought into the world. But then I discovered my company is part of growing cohort of “microenterprises.” As we get more plentiful—and powerful—we’re also getting more attention.  The reason:  We’re different from the small mom-and-pop shops and other conventional small businesses that have typically fueled the U.S. economy.  And while we’re populating Silicon Valley, we’re not you’re typical tech startup either.

Thanks to cloud-based technologies, co-working spaces, and other enabling resources, even the smallest of companies, like mine, are able to operate with the scale and reach that only corporate behemoths once could.  And we’re able to operate anytime, anywhere.  Because we’re able to do more and more with less and less, we’re actually shrinking in terms of our average size.  And if you thought a startup of the past could be nimble, think of what it portends to markets when we’re sneaking up on their players like an unseen colony of bacteria.

Micro-enterprises like mine are being defined as those with less than five-employees, with seed capital of less than $50,000.  Though we’ve been around for a while, we’ve largely been ignored–most notably by government number crunchers and policymakers who confuse “small” with “insignificant.” But in April, just before its IPO, Facebook raised eyebrows by paying nearly $1 billion for Instagram, a two-year-old, the micro-sized photo-sharing startup. Then, in mid-May, New York Times columnist Tom Friedman–he of “world-is-flat” fame–waxed rhapsodically about us.

It’s “easier and cheaper than ever to publish your own book, start your own company and chase your own dream,” he proclaimed. “Never have individuals been more empowered, and we’re still just at the start of this trend.”

Of course, what Friedman recently discovered is what you and I have known for while: Cloud-enabled software services are picking up where the PC and Internet left off.  Even more simply put, the cloud is lowering the barriers of entry some of the world’s most lucrative market segments.

Yes, there are more and more of us. Just how many? Depends on how you define us. Dawn Rivers, the editor and publisher of the Microenterprise Journal, likes to think of us as companies that don’t employ anyone else but the owners. She cites a Census Bureau stat that numbers “non-employer” companies at 21 million. Others, like the American Association Enterprise Opportunity, the self-proclaimed “voice of microenterprise,” claims the fewer-than-five-employees, less-$50,000-in-startup-capital companies stands at 25 million establishments, providing work for some 32 million people.

Claudia Viek, the CEO of the California Association for Microenterprise Opportunity, which owns the aptly named “microbiz.org” domain, says that in the Golden State alone self-employment has increased by 25% in just the past five years.

But there’s something even more astonishing taking place—something hardly anyone else knows about.  In a paper published in March, two economists at the U.S. Bureau of Labor Statistics found that individual microbusinesses are getting even smaller. The average size of non-seasonal startups fell from 7.6 employees in the 1990s to 4.7 in 2011.

Do the math, and the decline accounts for an astonishing 38 percent plunge.

The significance, as Rivers so nicely distilled it, comes down to this: “The size at which a business reaches scale has gotten much, much smaller.”

And, yes, while the economy is hardly cooking, don’t think for a minute that the proliferation of the incredible shrinking enterprise is the offspring of soaring unemployment rates.

According to a survey conducted at the behest of MBO Partners, a company that serves “solopreneurs” with a suite of back office services, 55 percent of us made a proactive choice to become self-employed. I did. Nor are we card-carrying AARP members in the twilight of our careers. According to the MBO study the biggest single demographic group among us–48%–is comprised of Gen Xers, the group of 30 to 49-year-olds in the throes of adult responsibility.

To out it bluntly, we’re not “the second-class citizens” you may have once considered us. In fact, we represent a formidable talent pool, and the most enlightened companies are tapping into us. MBO CEO Gene Zaino told me he sees more and more companies creating special offices, tasked with staffing smaller component projects from the ranks of contract workers as an alternative to hiring a big, blue chip consulting firm for a huge engagement fee.

And here’s a stat to that’s going to give second, and third, thoughts to corporate cubicle rats: The MBO study found that 80% of us are satisfied with being on our own. Along with your rivals vying for a company’s best talent, you’ve got a lifestyle choice luring them too.

But the biggest reason to watch out for us resides in how readily we can be overlooked. Like the germs on your hands, you may not be able to see us.  But that doesn’t mean we’re not there. Now instead of competing with foes around the world, Zaino says, large enterprises have to start worrying about “new business models that pop up right in their down backyard.”

My boss and I have been talking it over.  We don’t think we’re as far away as your backdoor.  We prefer to think we exist right under your nose.

Patrick Houston is the co-founder of MediaArchiTechs, a consultancy that helps to conceive, develop and grows technology fueled, revenue-generating media businesses. He is a former SVP for a new media startup, a GM at Yahoo, and editor-in-chief at CNET.com. He can be reached at patrick.houston@mediaarchitechs.com

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