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Why to Start a Startup in a Bad Economy

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Saved by 25 people (-10 private), first by anonymouse user on 2008-10-16


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When Microsoft and Apple were founded.

Highlighted by vkidd32

If we've learned one thing from funding so many startups, it's that they succeed or fail based on the qualities of the founders. The economy has some effect, certainly, but as a predictor of success it's rounding error compared to the founders.

Highlighted by joel

If we've learned one thing from funding so many startups, it's that they succeed or fail based on the qualities of the founders. The economy has some effect, certainly, but as a predictor of success it's rounding error compared to the founders.

Highlighted by vkidd32

Which means that what matters is who you are, not when you do it.

Highlighted by bobbyliu

If you're the right sort of person, you'll win even in a bad economy. And if you're not, a good economy won't save you.

Highlighted by vkidd32

And if you're worried about threats to the survival of your company, don't look for them in the news. Look in the mirror.

Highlighted by bobbyliu

nd if you're worried about threats to the survival of your company, don't look for them in the news. Look in the mirror.

Highlighted by bobbyliu

you should think far more about who you can recruit as a cofounder than the state of the economy

Highlighted by vkidd32

But if you have a specific idea you want to act on, act now.

Highlighted by bobbyliu

That doesn't mean you can ignore the economy. Both customers and investors will be feeling pinched. It's not necessarily a problem if customers feel pinched: you may even be able to benefit from it, by making things that save money. Startups often make things cheaper, so in that respect they're better positioned to prosper in a recession than big companies.

Highlighted by joel

Startups often make things cheaper, so in that respect they're better positioned to prosper in a recession than big companies.

Highlighted by vkidd32

You have to be a contrarian to be correct, and by definition only a minority of investors can be.

Highlighted by bobbyliu

Fortunately the way to make a startup recession-proof is to do exactly what you should do anyway: run it as cheaply as possible. For years I've been telling founders that the surest route to success is to be the cockroaches of the corporate world. The immediate cause of death in a startup is always running out of money. The cheaper your company is to operate, the harder it is to kill. Fortunately it has gotten very cheap to run a startup, and a recession will if anything make it cheaper still.

Highlighted by joel

run it as cheaply as possible

Highlighted by vkidd32

The immediate cause of death in a startup is always running out of money. So the cheaper your company is to operate, the harder it is to kill

Highlighted by vkidd32

Another advantage of bad times is that there's less competition. Technology trains leave the station at regular intervals. If everyone else is cowering in a corner, you may have a whole car to yourself.

Highlighted by joel

You're an investor too. As a founder, you're buying stock with work

Highlighted by vkidd32

And like any investor you should buy when times are bad.

Highlighted by vkidd32

So maybe a recession is a good time to start a startup. It's hard to say whether advantages like lack of competition outweigh disadvantages like reluctant investors. But it doesn't matter much either way. It's the people that matter. And for a given set of people working on a given technology, the time to act is always now.

Highlighted by joel