Yes, NOW is a Good Time to Startup

by Paul O'Brien / Thursday, 03 September 2020 / Published in Industry, Insights / Research, Startups

Nearly three quarters of the way through 2020, and with the world fully settled into the “new normal,” quarantine, “the recession?,” (or whatever it is that we’re calling this strange state of things), it’s still very frequently asked, “Is a time like this good time to start a startup?“

The best time is yesterday. The second best time is now. Even now.

Recession year startups, or near enough to the recession years (1892 was the year preceding The Panic):

General Electric. Year Launched: 1892.
General Motors. Year Launched: 1908
IBM. Year Launched: 1911.
Disney. Year Launched: 1929.
HP. Year Launched: 1939.
Hyatt. Year Launched: 1957.
Trader Joe’s. Year Launched: 1958.
FedEx. Year Launched: 1971.

Need more modern? Microsoft… Intel… Southwest Airlines… MTV… CNN… Airbnb… Bitly… Groove Networks.

One that surprises? Apple. Granted, FOUNDED in 1976 right as we were emerging from the recession but when do you think they started doing the work that led to it??

It’s easy to conclude that what’s best is starting a company when times are good.

Capital and consumer spending seems more accessible
And you probably have a job and sense of security so you can take some risk

Thing is, those are really the only PROS to starting in an up market. Because what it also means is…

Labor is more expensive
Labor is more competitive and fluid (likely leave you)
Capital is more expensive so while it seems it’s there, interest rates on loans and terms from investors favor them
That job and sense of security you (and other founders) have is actually a safety net with diminishes ambition, work ethic, and more.
Consumers might be spending more but they’re spending more with all of the competition, already known and further along
And in a healthy market, there is actually LESS attention on innovation because it seems like there are fewer problems to overcome.

A recession is precisely the time when great companies are built and incredible startups are founded.

Great companies are a result of a Mission and Vision as well as a commitment and passion to that, supported by innovating a solution to the market.

When is that MOST likely? When things are tough.

Here’s that entire list above, and what it means in a recession:

Capital and consumer spending tends to be down (eh…. but you’re just starting so, so what?)
You likely don’t have a job or that job security (so what do you have to lose??)
Labor is less expensive
Labor is less competitive and fluid (likely to stick with you)
Capital is LESS expensive so while it may not seem to be there (it is), interest rates on loans are low and terms from investors can be more flexible because they want to help
That job and sense of security you (and other founders) have is isn’t really a safety net so people tend to have more drive to create that safety net of their own.
Consumers might be spending less but they’re spending with an eye to better value, new solutions, and more.
And in a poor market, there is actually attention on and demand for innovation because there are clearly problems to overcome and a REASON for new companies.

Do it. Jump in. Now is the best time.

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Related Questions

How does the book Startup Ecosystems differ from Brad Feld's Startup Communities?

Reviewers describe it as the operating manual Feld's book pointed toward, written 15 years later with the benefit of seeing what actually worked, what didn't, and why. It's less evangelical and more diagnostic.

Why do most startup ecosystems fail?

Structural misalignment, not motivation or lack of effort. The most common causes: conflating startups with small businesses in policy, substituting public capital for market reform, pursuing optics over outcomes, and lacking the sector specialization needed to compound regional value over time.

How does IaaS apply to startup development organizations (SDOs) specifically?

Incubators and accelerators have a serious, operationally complex job: give founders access to global mentor networks, connect them to investors, manage deal rooms, deliver curriculum, and track relationships over time. Most do it with a stitched-together combination of video tools, Slack groups, shared Google Drive folders, and spreadsheets of mentor contacts nobody updates. The program director becomes a part-time IT administrator. What an SDO actually needs is civic infrastructure; purpose-built and comprehensive enough to deliver on what it promises founders. Ironically, an incubator's job is to teach founders to stop building things they don't need to build, and then those same incubators do exactly that with their own operations

What does a healthy startup ecosystem look like in practice?

Founders know who their potential investors are without needing referrals. Capital recirculates locally after exits. Universities push IP into the market rather than licensing it. Policy treats startups as a distinct economic category. Regional sector specialization creates defensible deal flow that attracts outside capital.

What's the difference between an entrepreneur, a business owner, and a startup founder?

These three categories overlap but are not the same. A business owner runs a company, often for stability and profitability. A startup founder is building for exponential scale and disruption, often with venture capital. An entrepreneur is a personality type characterized by risk tolerance, a drive to improve things, and a compulsion to act, even without permission, resources, or approval. Many business owners are not entrepreneurial. Some of the most entrepreneurial people never start companies. Some startup founders are entrepreneurial; others are simply ambitious employees with equity.