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.