Hiring and retaining staff remains the top challenge for New Orleans-area startup businesses as the economy emerges from the COVID-19 pandemic, according to the latest annual survey by Tulane University’s business school.
The survey by the Albert Lepage Center for Entrepreneurship and Innovation at Tulane’s A.B. Freeman School of Business, is in its fourth year and seeks to track progress of area startups in terms of their efforts to attract key workers, raise capital and grow their young businesses. The latest survey covered 150 companies across 10 parishes and was conducted in the spring.
Rob Lalka, a Tulane business professor who runs the Lepage Center, said the survey underlined the difficult choices facing startup companies as they try to hire staff in a labor market that has been tight nationwide over the last two years.
Surge in hiring intent
The survey showed hiring intent by startups was at its highest level since the survey began in 2019, with 68% of companies saying they planned to hire additional staff in the coming year. At the same time, there is much uncertainty about whether the changes to the workplace seen during the pandemic will be short-term or a permanent feature of the working environment.
In the survey, more than 50% of respondents said they were offering remote work as a benefit, the highest level seen so far. Health insurance benefits declined compared to the previous year.
“One thing that surprised me was that working from home was a benefit that employees valued even more than healthcare,” Lalka said.
The picture is not entirely clear cut, however, as it shows while more employers and employees want working-from-home as an option, both are looking to get back to the office more than they were during the height of the pandemic, at least for some of the time.
The survey found those citing home as the primary office space dropped from 48% in 2021 to 32%, while leased commercial space increased from 32% to 38% during the same period.
A hybrid office strategy
More startup businesses are looking to move to bigger spaces but they also are looking for shorter-term leases. The Lepage survey notes that demand for co-working space has made a rebound after declining in the previous two years, following a national trend.
After surviving a 15.6% decline globally in 2020, co-working spaces are positioned to benefit from companies needing to downsize their office footprint even while employees are still seeking in-person interactions, the report said.
While the move to more flexible working is accompanied by a decline in health benefits, companies are including some non-traditional perks more as part of their offering, the survey showed. These include parental leave, onsite bike storage, onsite showers and free catered meals.
On the financing front, companies saw more investment and in larger amounts. The latest survey showed 59% of companies raised some form of equity, up from 36%. Those companies reporting that they raised more than $1 million was at 62%, up from 42%.
To qualify for the survey the companies have to be for-profit and be less than five years old, or have revenue of less than $60 million or self-identify as being part of the New Orleans area “innovation ecosystem”.
A setback for minority financing
The survey is designed to track the region’s demographics, with 60% of founders identifying as White, more than 24% Black and nearly 6% identifying as Asian. Though, it under-represents the area’s Hispanic population, with 4% of respondents versus 7% of the population at large.
The 2021 survey had shown that while White founders raised more equity financing than their Black counterparts, the gap between the two categories had narrowed. Equity financing from venture capital investment increased 13% for Black and other minority founders and 7% for White owners, while angel investment also increased 13% for Black owners and by 4% for White founders.
The latest survey showed a reversal in that trend, as companies with Black founders saw a decline of 6% and 8% in the percentage of venture and angel financing they raised, with those companies with White founders saw venture financing rise 11% and angel financing go up 6%.
Lalka said he hopes the setback in closing the racial gap in financing is temporary. There was a surge in financing for Black and other minority businesses in the wake of the protests that raised awareness of inequities in 2020 and the following year. He noted the New Orleans survey showed an increase in diversity generally among founders and executives at startups, as well as more funding for Black startups from incubator and accelerator funds.
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