Got A Side Hustle? Here’s How To Get Funded
By: Shafin Diamond
Tags: Entrepreneurship, Startup, Side Hustle, Small Business Owner, Business

The word entrepreneur may evoke images of titans like Jeff Bezos and Elon Musk. But the business founders changing the game in pandemic-ravaged 2020 aren’t bold-faced names. With unemployment in Canada near all-time highs, everyone from out-of-work physiotherapists and fitness trainers to cooking instructors and tour guides have started businesses from their laptops.

Some call themselves “side hustlers,” others “digital entrepreneurs,” or even “Covid-preneurs.” The common denominator: as Covid-19 has disrupted the traditional economy, they’ve opened businesses in record numbers, often driven largely out of necessity.

Indeed, Shopify, the e-commerce company that helps many small- and medium-sized businesses create online storefronts, reported 71 percent more new stores on its platform in the second quarter of 2020 compared to the previous quarter. Across the country, more than 30 percent of online entrepreneurs have seen sales increase during the crisis.

As Canada seeks to weather and emerge stronger from the pandemic, bolstering these new, digital entrepreneurs is going to be a key piece of the puzzle. Their businesses may be small but the impact is anything but. In fact, the overwhelming majority of Canadian businesses — nearly 4 million in total — have fewer than four workers or are run by solopreneurs.

The question is: can we find a better model for supporting them, when they need it most?

Hustlers’ hidden powers

Supporting digital entrepreneurs starts with acknowledging their strengths. Founders of small and solo enterprises may lack financial resources and experience, but many have deep insider knowledge of their markets — whether that’s basketball sneakers or bespoke yarns — and the determination to build through ample sweat equity. They’ve cultivated audiences and social cred in very distinct niches. In effect, they’ve built a market ready to be monetized.

Add to this another key ingredient: resourcefulness. Digital entrepreneurs have learned to do more with less, embracing a DIY approach to building businesses that leans heavily on creativity and improvisation. This resourcefulness is compounded by the fact that many of today’s digital entrepreneurs are young people, women and minorities — groups often overlooked by traditional investors. The child of immigrants, I started my first venture, an online dating site, out of my dorm room, and know the self-reliance and grit this cohort brings to the table.

Finally, today’s online entrepreneurs have both the tools and digital savvy to market and sell to audiences virtually anywhere. From Etsy and Shopify to Square and Instagram, contemporary digital platforms — many of them free or low-cost — level the playing field, mitigating the lack of technical skills and capital. Physical space, bank loans and industry connections are no longer needed to set up shop. You literally just need a smartphone.

The downside of being undersized

But there’s a flipside. With low barriers to entry, founders face enormous competition and can easily get lost in the noise. It’s never been easier to get into entrepreneurship. But companies that start with fewer employees — especially those with just 1–4 people — suffer lower survival rates than bigger companies. When anyone can start a business with the click of a button, the real challenge becomes standing out from the crowd.

And no digital toolbox can replace a true network, i.e. access to people who have been in the trenches and can help accelerate growth and avoid missteps. Too many digital entrepreneurs operate in isolation, without real guidance or mentorship. I muddled my way through my first entrepreneurial efforts, making every mistake along the way. What I sorely needed were basic business skills, from accounting to HR.

Finally, many everyday entrepreneurs are risk averse and have no funds to grow. So many side hustlers don’t have the luxury of leaving their day jobs. Funding for their business is limited to lines of credit, loans from family and credit cards. As a result, these businesses — despite their promise and the passion of their founders — are often left in a funding black hole. Many never have a chance to scale and are relegated to passion projects.

Toward a new model

Across Canada, provincial agencies like Small Business BC and nonprofits like Futurpreneur have long been working to help fledgling entrepreneurs get access to information and mentoring. But, as the crisis continues to impact the economy, too many digital entrepreneurs still fall through the gaps.

These founders need targeted support in three key areas: training, networking and funding. By training, I don’t necessarily mean formal education like MBAs. Many hustle-preneurs have abundant business savvy, but limited time. They need a narrowly focused, online learning platform to fill gaps in their knowledge.

Likewise, even the smartest, most driven entrepreneurs need others to lean on for insights, business connections and guidance. For digital entrepreneurs, this network needs to be online and accessible anywhere, comprised of both peers who can trade tips and mentors who can share hard-earned expertise.

Of course, no business gets far without funding. Traditional investment models — from VCs and angels to banks and accelerators — aren’t set up for small-scale, digital entrepreneurs. What’s needed is a funding model that expressly serves this cohort, recognizing both its limits and potential. Funding in the form of income replacement, for instance, can help side hustlers bridge the gap between paychecks and profits. Meanwhile, creative equity and revenue-sharing approaches suited to new digital entrepreneurs can facilitate scaling without incurring added risk.

The pandemic has shaken our economy, but it’s also accelerated important shifts already underway toward entrepreneurship. We must equip our population with the tools to be successful, especially founders and business owners who have been overlooked or underserved in the past. Now, more than ever, it’s critical to support Canada’s growing body of digital entrepreneurs. That’s why we’re working on a special fund to support side hustlers and entrepreneurs. Stay tuned for more details!

A version of this article was originally featured in Bay Street Bull. Keep up with my latest posts by following me here or on Twitter and Instagram.