Today marks the release of the fifth annual Greater New Orleans Startup Report. When the GNO Startup Report first came out in 2019, one of the most important goals was to serve as a benchmark for the local early-stage business landscape. No one could have predicted all the challenges we’d face in the coming years: the COVID-19 pandemic, hurricanes, floods, inflation, workforce disruptions, threats of a recession, and the list goes on. Entrepreneurs in New Orleans have overcome incredible obstacles these past few years.
All of us at the Lepage Center now realize that the GNO Startup Report is more than just data; it reflects the collective voice of local entrepreneurs, showcasing the city’s innovative spirit and dedication to improving our economic future. Beyond charts, it tells a story of problem-solving and entrepreneurial drive.
This year, we’ve refined our approach, delving deeper into comparisons between small businesses and high-growth startups. Our objective was to craft a comprehensive and detailed representation of our entrepreneurial landscape that could guide our initiatives to support a diversity of businesses across the region. As we move forward, our commitment remains steadfast in evaluating evolving trends within these communities, so that our support aligns with the dynamic needs of our entrepreneurial ecosystem in the years ahead.
At the start of 2022, economic projections presented a bleak horizon – a looming recession, fears that were echoed in conversations with entrepreneurs. The data in the 2022 report pointed to these apprehensions, revealing an ecosystem grappling with workforce challenges, labor scarcity, rising costs, and difficulty finding qualified candidates.
With the backdrop of last year’s predictions and the many tumultuous economic forces experienced in 2023 – soaring inflation rates, workforce layoffs, and a series of daunting challenges including the collapses of Silicon Valley Bank, First Republic, FTX, and others – we expected to find a weathered and worn-out entrepreneurial ecosystem. The 2023 report offers reason for cautious optimism amid these challenges. Starting at $1.56 million in 2020, the average revenue experienced a sizeable increase to $2.31 million in 2021, only to decline to $1.65 million in 2022. Despite these fluctuations, startups showcased remarkable adaptability. For example, the revenue decline suffered by retail, likely due to reduced consumer spending from inflation and interest rate hikes, contrasts with the notable growth in infrastructure/transportation, which was potentially buoyed by Louisiana’s $3.1 billion infrastructure bill allocation.
Anecdotally, New Orleans’ hospitality sector might seem to be barely hanging on after repeated pandemic setbacks. This skepticism could feel well-founded, especially amid a continuous series of closures affecting neighborhood restaurants and bars. Yet surprisingly, the average gross revenue for this sector more than doubled from 2021 to 2022, and the projections for 2023 indicate a staggering growth of over 124%. This increase not only indicates encouraging possibilities for this important industry but is also promising for our wider cultural economy.
While some of our companies are struggling due to lingering impacts of the COVID-19 recovery and other economic pressures, evidence of resilience appears in the data. We continue to nurture startup “camels” instead of only chasing after ever-elusive “unicorns” (as Alex Lazarow put it in his book Out-Innovate, which was discussed in last year’s report). This ethos resonates in our ecosystem, with companies displaying adaptability amid tough conditions across many areas such as workplace setup, benefits, hiring and retention. Home offices were the favored workspace since the inception of this report, but last year’s report indicated a shift to leased commercial spaces, a trend that persists in 2023. This echoes what Forbes has noticed — a growing desire amongst employers for their employees to return to the traditional office setting.
Data on employee benefits reveal a vivid picture of company growth and evolution. For example, firms offering remote work increased from 33% in 2020 to 54% in 2023, which could indicate a continued commitment to a hybrid work culture. After a dip in 2022, medical insurance offerings hit a record high in 2023 at 40.8%. Over five years, benefits such as paid time off, parental leave, 401k matching, life insurance, and education funding have all gone up. For instance, 401k matching nearly doubled from 14.3% in 2019 to 27.6% in 2023, while life insurance rose from 11.8% to 19.4%. Funding for employee education increased to 21.4% in 2023, up from a low of 12.3% in 2022. This trend likely reflects employers juggling talent attraction, economic conditions, and pursuing stability and growth during uncertainty.
Hiring intent remains robust, with 69% of companies planning new hires in the next 12 months. Uncertainty has hit a five-year low of 22%, a significant decrease from 2019 when 37% of companies were unsure about their hiring plans. These trends potentially signal more
stability ahead for the job market, although the impact of COVID-19 is still being felt. Economist Loren Scott foresees approximately 20,800 job opportunities in the next 2 years in upcoming projects, including industrial developments and coastal restoration. Coupled with major initiatives like Tulane’s Charity redevelopment and anticipated events like the Super Bowl in 2025, this suggests favorable prospects for the local economy.
This year’s report also shows promising trends regarding who’s getting capital and how much, along with other shifts in the investment scene. We’ve seen a clear increase in companies securing angel investments, convertible debt, and venture capital—the highest uptick since 2019. Despite a consistent rise in firms securing over $1 million post-2020, 2023 shows a move toward smaller funding amounts. This mirrors global early-stage funding trends, where funding hit $34 billion in Q3 2022, indicating a quarter-over-quarter drop and a substantial year-over-year decrease.
Regional businesses are making impressive strides toward increased access to capital, particularly for female-founded firms. In 2021, a significant gender gap in access to equity financing was evident, particularly in angel investments (a 21% disparity) and venture capital (a 10% disparity). This year, we’ve seen substantial progress. The gender gap in angel investment has narrowed from 13% in 2022 to just 1%, while convertible debt shows a similar pattern, reducing from 8% in 2022 to 2%. Most compellingly, despite lower representation in our sample, female-founded companies’ access to venture capital is now 29.6%, surpassing their exclusively male-founded counterparts at 25.8%.
During recent years, the story of equity financing for Black, Indigenous, and People of Color (BIPOC) entrepreneurs has not been one of consistent improvement. However, 2023 signals a positive shift, as BIPOC founders have notably gained increased access to capital. In 2020, BIPOC-founded firms faced a stark disparity, being half as likely as their white counterparts to access angel investment and convertible debt. By 2021, these gaps narrowed, which many attributed to the aftermath of George Floyd’s murder and the racial justice movement. However, in 2022, a concerning shift occurred, with the access gap to venture capital widening to 13% for BIPOC-founded companies. In contrast, this year the angel investment gap dropped from 17% in 2022 to 3%, and the venture capital gap decreased from 13% in 2022 to 5%.
Five years ago, as we sought to assess the health of our entrepreneurial ecosystem, we were most concerned about issues like capital scarcity, funding disparities, and underutilized potential. Over this time, we’ve witnessed considerable progress—significant exits, an increase in capital injections, and promising signs for further investments—along with notable setbacks, including decreases in recurring revenue, major changes in the workforce, and a variety of unpredictable economic impacts. Initiatives such as Tulane’s Innovation Institute, the new Tulane Ventures Seed Fund, and the redevelopment of Charity – along with LSU’s Tech Hub designation for offshore wind projects, the planned SSBCI Louisiana Seed Capital Program, the Third Coast Venture Summit, and many other efforts – all will support the entrepreneurs across our region. However, optimism about the future doesn’t solely need to come from these opportunities and successes. It can also arise from how we have (and will) overcome challenges, which is the most important message from the past five years.
The 2023 GNO Startup Report reflects the collective resilience of our entrepreneurs—who have navigated complex challenges through strategic planning, innovative management, and tough decisions during ongoing uncertainty. We undoubtedly will face new hurdles over the next five years, but we now have a far greater understanding of how we’re doing as a startup ecosystem, and I am grateful for every supporter of (and contributor to) the Greater New Orleans Startup Report over the past half-decade.
The full 2023 Greater New Orleans Startup Report is available at: gnostartupreport.com