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By Jack Ganssle
No Time For a Startup?
I started a business during the severe recession of the early 80s. A lot of wags warned me that "this is no time to take risks!" But one smart fellow advised that the only time one has is now. Things might be bad, but things always get bad. Wait, and life may take one in a direction that makes doing a startup a problem.
He was right.
So, is today a good time or a bad time to form a startup? Certainly there are significant risks, but there are always risks.
Successful businesses start with having a customer, and customers with cash might be in very short supply today. But the economy hasn't dried up; the GDP is off a handful of points, but spending levels have not changed significantly. In difficult times smart customers are always looking for a better, cheaper, or more efficient way of accomplishing some goal. Given a product or service that truly addresses those needs, it may be The Next Big Thing. Or at least the foundation for a successful business.
Certainly credit and VC money is tough to find. http://www.nytimes.com/2009/04/18/business/economy/18venture.html?hpw
I read recently that VCs in the US have funded only a single company in 2009. But most startups begin life as small outfits with modest goals. VCs have never funded those. And even in the best of times banks laugh at people proposing a startup unless there are significant assets to guarantee a loan.
Lots of us have used home equity to fund companies, or a fistful of credit cards. The former is definitely less of an option today. The latter, well, has always been tremendously risky. But risk is an essential part of a startup.
Certainly there are more people available. Layoffs hit the losers and good folks alike. The supply of engineering and other talent is high now.
In good times there's plenty of competition. Recessions weed out the weak, opening opportunities for smart people with brilliant ideas.
Every recession ends. The companies that use the tough times to invent new products will be much better positioned to profit from the rebound than those which draw inward.
I never advise people to start a company unless they have a fire burning within, a great idea, and the skills to execute. One has to be willing to bet it all, and to work like Sisyphus. But given those, I think one outcome of this recession will be a host of new startups.