Beyond Jobs: Small and Medium Sized Businesses are a Vital Conduit to Health, Wealth and Privacy
By: Andrew Wegryzn
Small and Medium Sized businesses (SMBs) are often cited as a vital engine to US economic vitality. Typically, the number of new jobs provided by SMBs each year is used to bolster the case that SMBs are a an essential pillar of US economic health and growth. Small businesses employ almost 50% of all workers in the US after all.
But beyond jobs alone, SMBs are also vital means for providing financial and insurance products to employees. More and more, SMBs are charged with enabling employees to manage their financial wealth and physical health in a secure data environment that shows due deference to sensitive employee and stakeholder data elements.
Additionally, SMBs are sustaining pieces of the supply chain for larger businesses, customers, and governments. Simply put, it isn’t just the jobs SMBs provide alone, but also the connectivity to health, wealth and privacy they enable for their employees, customers, and supply chain stakeholders that make them vital to the US economy.
Current day obstacles to SMBs are considerable and pose threats to national economic growth, employee health and wealth management, as well as the security and stability of supply chains across industries. Between 2020 and 2022, SMBs disproportionally endured hardships under polices enacted in an attempt to mitigate the effects of COVID-19. These ineffective polices caused a disruption that “represents a shock to America’s small firms that has little parallel since the Great Depression of the 1930s.” Large banks and other lenders have not approached this sector with the rigor needed to drive SMB growth. According to McKinsey, most banks are not reaching their potential in this regard. Healthcare costs continue to crush small businesses as well — year after year.
What can be done to bolster systems and improve digital solutions around SMBs given these pernicious challenges?
Large banks appear to be refocusing efforts on SMB services after a years-long curtailment from the space generally. JP Morgan Chase for example recently announced plans to hire of 500 bankers over the next two years to serve the sector — boosting total staff catering to SMBs by 20%. Current day, SMBs are woefully underfunded and banks as a whole are failing to meet demand for capital in the sector. Legacy technology is partially to blame for this fact, along with an overall atrophy of banker knowledge of business operations, SMB customer creditworthiness, and other factors. VC’s have a vital role to play in funding and supporting new FinTechs that enable lending to SMBs as well as other vital financial services.
In terms of SMB cyber security, SMBs are up to three times more likely to endure a cyber-attack as compared to large businesses. Between 2020 and 2021 cyber-attacks on SMBs increased over 150%. Bad actors view small business as more vulnerable and much less likely to have controls and monitoring in place — making them a comparatively easy target. Despite this fact, SMB investment in solutions that could potentially mitigate or eliminate these threats are woefully underfunded. Startups on average spend less than $500 annually on cyber security which is troubling when considering that 60% of startups fail within 6 months of a cyber-attack. This is similarly a sector where VC-backed firms are having a real impact — bringing SMBs security to a place where upstream and downstream reliant partners can feel confident doing business.
New health solutions are coming to market that have great potential to provide much needed relief to SMBs as well. Companies like Angle Health are using modernized a data stack and digital-first approach to enable customer service, underwriting, and disease management in a way that has real impact for SMB clients and their employees. Innovative companies like Angle Health are re-writing the playbook of how employers provide value-adding health solutions to employees — solutions that have a strong influence on improving SMB employee health overall.
As VC investors seeking bold and innovative solutions across FinTech, InsurTech, Digital Health and Cybersecurity, visibility to single or multidisciplinary approaches and platforms addressing these issues are invigorating and a sure sign of innovative solutions rising to meet a market need.
Startups are stepping into the void left by larger firms not only for lending products, but a wide range of financial and insurance products that are flexible, easy to implement, and built on a modern tech stack to deliver on customers’ increasing service expectations.
Investing in new solutions across SMB health, wealth, and privacy will have an oversized positive impact on overall economic and physical health given the oversized impact SMBs have on these elements generally.
