The Business Development Bank of Canada (BDC) has published a report that maps the impact of the economic climate onto the mental health of Canadian entrepreneurs.
Based on a survey with 1,500 respondents, BDC found that rising inflation rates has taken a toll on startup founders, identifying that as a potential stressor that could be behind why their mental health significantly declined in the last year.
Over half of survey respondents also listed work/life balance and cash flow as major stressors.
According to BDC, 45 percent of Canadian business owners who took part in its survey indicated that they felt mental health challenges, compared to 38 percent in February 2022.
Rising inflation rates and the overall volatility in the economy has been causing financial strain on a variety of businesses as they face higher costs for operations and shifting consumer demand.
Business owners identified this uncertainty and instability in finances as the leading cause of their deteriorating mental health. Compared to the previous year, founders’ satisfaction with their mental health went down by eight percentage points.
In the face of a difficult fundraising market, startups are among those who have been hit the hardest with inflation.
In addition to inflation, over half (54 percent) of BDC’s respondents also listed work-life balance and cash flow as their main sources of stress.
Among other major sources of stress for business owners this year are the economic slowdown or recession (45 percent), high self-expectations (43 percent), and raising capital (26 percent), according to BDC’s report.
BDC also used the World Health Organization’s (WHO) Well-Being Index to assess the mental health of Canadian business owners with a scoring system out of 100. This year, BDC reported the average score was 58. Additionally, it found over a third (35 percent) of respondents scored 50 out of 100 or less, which signals a low level of well-being.
BDC’s data confirms the struggles that startup founders have been facing, including issues when it comes to intersectionality.
Entrepreneurship comes with its own unique set of challenges. However, people from marginalized communities face additional systemic barriers that can put them at a greater disadvantage when it comes to their mental health.
According to BDC, those who are more likely to score lower on WHO’s Well-Being Index are people with disabilities, those who belong to a religious minority, women, and young business owners who are under 45 years old. Consequently, those groups of people are also more likely to seek professional help, as reported by BDC.
As liquidity becomes tighter in a recession, the diversity problem in venture funding is exacerbated. People from diverse groups have historically received less institutional investments than their straight white male counterparts.
For example, the Conference Board of Canada reported in 2022 that women have a harder time raising capital than men. It found that compared to men, women said it took longer to raise Series A financing, requiring more pitches to do so.
TechCrunch also reported that Black entrepreneurs saw a dramatic decrease in funding last year as investors retreat to assets that they deem “safe.” RareBreed Ventures founder McKeever Conwell told TechCrunch that “investing in founders of colour, as we’ve seen over decades of venture capital, is what is deemed to be the safe thing to do.”
BDC’s report indicates more work needs to be done to improve mental-health support for entrepreneurs from diverse backgrounds as they face the changing dynamics of the economy.
BDC said it is set to launch a pilot project this fall that will provide some of its existing clients with access to virtual therapy.
Featured image courtesy Unsplash.