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RI BUSINESS

Many of R.I. startups were founded out of necessity during the pandemic. But will the trend last?

In 2020, 10,549 new companies, not including sole proprietors, registered their business with the state. So far this year, nearly 8,600 have already registered

After the coronavirus pandemic affected his valet business, Kenneth Zorabedian, right, had to pivot. He launched a vending machine company in May 2020, and a food-delivery business called Delivery As Soon as Possible in November 2020, which he runs with his sister Felicia Neves.Pat Greenhouse/Globe Staff

PROVIDENCE — Kenny Zorabedian was standing at a vending machine one night last May, filling it with snacks and wondering what else he could do to get by.

He was a veteran business owner, employing more than 100 people at United Parking Valet when the pandemic forced him to make some difficult decisions. His clients had been forced to shut down because of COVID-19. His labor force shrank to just four people. He started the vending machine company, but was constantly looking for a new business idea that could help fill a need.

In November 2020, he started a delivery company called DASAP (“Delivery As Soon As Possible”). He’s partnered with nearly 40 restaurants so far, and more are interested. He’s even considering expanding his service to deliver more than restaurant-prepared foods. His sister, Felicia Neves, who was laid off from her retail job at Nordstrom’s, handles dispatch, runs the technical side of the business, and establishes relationships with new accounts.

DASAP driver Ryan Brady, right, hands Levi Kase his order from Harry’s Bar & Burger.Pat Greenhouse/Globe Staff

“At first, it was really tough to get restaurants to join. They didn’t have the staff this whole spring, and to ask them to put another tablet on the counter was going to be tough,” said Zorabedian. “But now it’s really catching wind.”

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Zorabedian is one of many Rhode Islanders who turned to entrepreneurship to survive the pandemic. In 2020, 10,549 new companies, not including sole proprietors, registered their businesses with the state — nearly 1,000 more than in 2019. Nearly 8,700 have registered in 2021 so far. The startup boom that started in Rhode Island about 10 years ago doesn’t seem to have slowed down.

On average, more than 38 new businesses file in the state each day, and there could be many more that have not been counted, as businesses aren’t required to file.

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But some economists are skeptical about whether the upward trend can continue.

“When we’ve had companies, especially tech companies, that look promising, they end up going to Massachusetts,” said Leonard Lardaro, an economist at the University of Rhode Island. “It’s a better business climate with more of an industry.”

Rhode Island has received criticism for its business climate, ranking 46th out of 50 on CNBC’s 2021 Top States for Business list — an improvement over 2020, when it ranked dead last. It received failing to low grades in categories related to the cost of doing business, access to capital, infrastructure, cost of living, and the economy, but garnered mid-tier grades for its higher education institutions, technology, and innovation.

Lardaro says he thinks the state, and its lawmakers, are still wrangling with how to thrive in a post-manufacturing economy.

In the 20th century, jewelry manufacturers did major business in the state. Many of their factories closed when companies outsourced overseas. Brown University has made significant investments in Providence’s old Jewelry District, including more than $225 million in development over the last decade, and health care leaders are eyeing the area as the next possible biomed hub, which could inspire more business and startup growth.

Lardaro, who has been evaluating the state’s economy for decades, said there’s still a long road ahead.

“No one will ever accuse Rhode Island of moving rapidly. Other states really know how to seize upon something and make it grow. We’re just not built that way,” he said.

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Though some state leaders, like Governor Dan McKee, have been particularly business-friendly, many elected officials in the General Assembly are not, according to Lardaro, who said he has met with many of them.

“Even when they are well intentioned, it goes in one ear and out the other,” he said.

But the increase in startups is being seen on a national level too. Nationally, Americans filed almost 3.1 million IRS Employer Identification Number applications in the first 26 weeks of this year, according to figures from the US Census Bureau. That’s more than the 2.4 million filed in the second half of 2020.

In Rhode Island, experts say students may be boosting the trend.

Danny Warshay, the executive director of the Nelson Center for Entrepreneurship at Brown University, has overseen several startups launched by students and local residents in the five years since the center opened. Coming from Harvard Business School and Yale University, he said Brown tackles economics differently than other schools.

“These are really creative, caring students that really want to solve a consequential issue. That’s what you get at a liberal arts school opposed to a general business school,” he said.

Some of the businesses launched by Brown students include MediCircle, which redistributes unopened oncology medication to financially burdened patients; Pangea, which connects college students to freelance work; EmpowerU, which addresses disparities in education among low-income students; and Omena, which looks to break the cycle of emotional abuse in the founder’s homeland of Madagascar.

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Experts say many of Rhode Island’s new startups were founded because people were forced out of their careers during the pandemic and had to find a way to keep working.

Jim Verity, an interior designer and event planner who has spent years coordinating nonprofit fund-raisers, galas, and weddings, launched SaniTides, which creates all-natural hand sanitizer and antibacterial face mask “refresher.”

“For 20 years prior to the pandemic, I was making an all organic, plant-based spray made of witch hazel for myself and for gifts for friends. I never really thought of them as a full business. And then the pandemic came,” said Verity, who is soon expanding into vegan shampoos, body washes, lip balms, and insect repellant. He recently partnered with Blue Cross Blue Shield of Rhode Island, which included his products in free care packages for at-risk populations across the state.

New lifestyles inspired new companies as well. Michaela Antunes and John Taraborelli were among the tens of thousands of Americans who adopted a puppy during the pandemic. Their rambunctious dog, Hazel, sparked many questions related to training, food, stages of life, and even how to interact with other dogs. So they’re developing DogFrens, an app they said will be a “Tinder for dogs,” but with forums for dog owners to help sort through all their pressing questions. It’s slated to launch in March 2022.

”When our puppy hits it off with another dog at the park, there’s that awkward moment between owners,” said Antunes. “Now owners can swap contact info through the app and set up play dates.”

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Like many startups, they’re looking for local investors, but said one thing will always remain true.

“At the end of it, we want to be known as the tech company that launched in Providence, and stayed in Providence,” said John Taraborelli. “We want this to be a Rhode Island company.”


Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her @alexagagosz and on Instagram @AlexaGagosz.