Starting up during a recession?
April 1, 2009
by Olivier Cabanes
What are the ideal conditions for an entrepreneur to take the leap and launch his startup? When is the right time to jump in? As far as economic cycles are concerned, I think there is probably no “right time”. In fact, motivated and competent teams/individuals should always be able to draw advantages from the environment they operate in, regardless of the economy.
At last week’s Capital Innovation, it was interesting to hear JLA Venture’s Pierre Donaldson speak along those lines as he drew a picture of the 2009 VC landscape. Here are three things he mentioned that I think every entrepreneur should remember in times when valuations are down and venture funds are scarce:
- Adverse economic conditions will give rise to stronger companies as they force entrepreneurs to run a tighter ship.Consequently, the balance sheets shown to VCs will be healthier and the chances of getting funded are increased.
- While layoffs are generally bad news to most people and the overall economy, they can be a great opportunity for startups. Previously unavailable or unaffordable dream candidate might be looking for a job now, and the perks offered by startups might be more appealing to them than in past times.
-An entrepreneur that has a good business to show (team, product, and business model) should be able to raise funds in order to scale and grow. VCs might have handed out fewer term sheets in the past few months, but companies still got funded.
So when you combine this with the stimulus plan outlined by Quebec in its recent budget (see also Raymond Luk’s post on the subject), I think 2009 should offer a very decent environment for tech startups.
Entry Filed under: Entrepreneurship, Financing. Tags: 2009 VC Landscape, adverse economic conditions, balance sheets, Capital Innovation, economic cycles, entrepreneur, funded companies, good team, launching a startup, quebec stimulus plan, raising funds, recession, scale and grow, starting in a recession, tech startups, term sheets, valuations, venture funds.
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1. heri | May 10, 2009 at 7:50 am
Well I think an [economic] crisis is one of the best times to start a new startup; since you have the opportunity to challenge existing practices and ideas, which would be more difficult in stable times
2. Kopertowki | August 18, 2009 at 4:54 am
Recession means that there are not only threats to all who want to start new business (or to keep the old one) but also some opportunities. Soon the crisis will be over and we would need some help to get to the point where we were before the recession. And here is perfect place for new companies. Everyone just need a niche that will need to be filled as the growing market will consume more and more products of that specific kind. The situation is not as different as it was few years ago, the rules are just the same.