Why to Start a Startup in a Bad Economy • Hacker News Board

Re: Why to Start a Startup in a Bad Economy

#11

Post by robg » Thu, Oct 16, 2008, 2:00 PM UTC

pg wrote: post #6

brk wrote: post #2

Good article, but I disagree with the Microsoft/Apple example in the beginning. MS and Apple happened to come along when the microcomputer was really starting to take off, and they were able to ride that wave (while 1000's of other microcomputer startups crashed). One thing that worries me personally about starting the "stereotypical" HN startup right now, is that I think the free/fremium model is going to lose steam…

MS and Apple happened to come along when the microcomputer was really starting to take off, and they were able to ride that wave That was the point I was making with those examples: that technology evolves independently of the stock market. So if it's time to build the Apple I or Altair Basic, do it whether the economy is good or bad.

After reading the Woz interview in Founders, it's obvious that he wasn't paying much attention to the stock market. He was too busy doing what he loved. Their initial business approach (cash for product) may have been produced by their times, but they didn't let that stand in the way.

And that's the lesson for me. All I can control is my immediate situation. The other stuff is just noise best drowned out by hard work at things I enjoy.

Re: Why to Start a Startup in a Bad Economy

#12

Post by yummyfajitas » Thu, Oct 16, 2008, 2:06 PM UTC

greendestiny wrote: post #7

I'm not sure I follow that bad times being a good time to invest means that its a good time to start a company. Investors want a low price, but for founders I would have thought the amount of effort (price paid) is fairly much independent of the economy.

Opportunity costs are lower.

If the economy were good, the opportunity cost of building a startup would be a high paying job as a quant.

Since it's bad, all I'm missing out on is a shot at postdoc #2 or a faculty position.

Re: Why to Start a Startup in a Bad Economy

#13

Post by alecco » Thu, Oct 16, 2008, 2:09 PM UTC

Very refreshing and rational. Thanks PG!

Re: Why to Start a Startup in a Bad Economy

#14

Post by davidw » Thu, Oct 16, 2008, 2:09 PM UTC

I think it's fairly easy to write those things. What will be more interesting is actual data after a few YC rounds in a weaker economy.

Re: Why to Start a Startup in a Bad Economy

#15

Post by robg » Thu, Oct 16, 2008, 2:11 PM UTC

danielh wrote: post #4

brk wrote: post #2

Good article, but I disagree with the Microsoft/Apple example in the beginning. MS and Apple happened to come along when the microcomputer was really starting to take off, and they were able to ride that wave (while 1000's of other microcomputer startups crashed). One thing that worries me personally about starting the "stereotypical" HN startup right now, is that I think the free/fremium model is going to lose steam…

Indeed, there are a ton of web-apps that probably will never take off. Still, there is the big advantage that you can build a prototype almost for free. Other fields (solar, biotech, whatever) might require way more money to start. For real stuff, like machines, not for swag and parties. Having nothing than an idea, how do you convince a VC that you need a ton of money, given the current economic situation?

Still, there is the big advantage that you can build a prototype almost for free.

As we build, this point still amazes me. If you're willing to put in the time and effort, the cost is not prohibitive. Build in spite of the VCs, not because of them. If your product is good enough, users will force them to find a path to your door. And, of course, you still have a day and a half:

http://ycombinator.com/w2009.html

Re: Why to Start a Startup in a Bad Economy

#16

Post by Alex3917 » Thu, Oct 16, 2008, 2:15 PM UTC

"Last year you had to be prepared to explain how your startup was viral. Next year you'll have to explain how it's recession-proof."

In my experience, what's true of investors here is also true of potential co-founders. It's so much easier to get other people to work with you if your project is in a trendy field or appeals to the dominant logic of the afternoon. And it's really really frustrating.

/end rant

Re: Why to Start a Startup in a Bad Economy

#17

Post by alecco » Thu, Oct 16, 2008, 2:16 PM UTC

brk wrote: post #2

Good article, but I disagree with the Microsoft/Apple example in the beginning. MS and Apple happened to come along when the microcomputer was really starting to take off, and they were able to ride that wave (while 1000's of other microcomputer startups crashed). One thing that worries me personally about starting the "stereotypical" HN startup right now, is that I think the free/fremium model is going to lose steam…

MS and Apple happened to come along when the microcomputer was really starting to take off

There are very good waves to ride right now. For example: Cloud computing, IPv6, Energy Saving, and moving everything out there to AJAX.

All of those will obsolete other technologies and most will save money.

Re: Why to Start a Startup in a Bad Economy

#18

Post by kingkongrevenge » Thu, Oct 16, 2008, 2:25 PM UTC

brk wrote: post #2

Good article, but I disagree with the Microsoft/Apple example in the beginning. MS and Apple happened to come along when the microcomputer was really starting to take off, and they were able to ride that wave (while 1000's of other microcomputer startups crashed). One thing that worries me personally about starting the "stereotypical" HN startup right now, is that I think the free/fremium model is going to lose steam…

> I would look to solar and certain other viable alternative energy options right now as the next major tech growth sector.

Right. The next wave is further electrification, new power generation, and first world infrastructure renewal. New advanced rail and massive rail line build outs. Rebuilding sewage and water systems. Alternative energy. Revamping agriculture for expensive oil and scarce fresh water will also be a big hi-tech area.

I'm sure the garage hackers will make money here and there as part of the wave, but they will be auxiliary; not like with the PC or internet booms. The main stage will be the capital intensive stuff working with actual raw materials.

Re: Why to Start a Startup in a Bad Economy

#19

Post by aaronsw » Thu, Oct 16, 2008, 2:37 PM UTC

This article seems to ignore the main argument I've heard: exit strategies are fewer in a recession. IPOs are out of the question and few companies are in an acquisition mood. So instead of growing fast and selling out before you hit your plateau, you have keep your traffic climbing until the market picks back up. That's really hard, esp. since founders have a tendency to get bored. I expect many will start something new at that point anyway, so I can see why it'd be tempting to skip the step in between. (That said, it's hard to think of a better way to spend the time -- even a failed startup's more educational than grad school.)

Re: Why to Start a Startup in a Bad Economy

#20

Post by incomethax » Thu, Oct 16, 2008, 2:45 PM UTC

aaronsw wrote: post #19

This article seems to ignore the main argument I've heard: exit strategies are fewer in a recession. IPOs are out of the question and few companies are in an acquisition mood. So instead of growing fast and selling out before you hit your plateau, you have keep your traffic climbing until the market picks back up. That's really hard, esp. since founders have a tendency to get bored. I expect many will start something…

While exit strategies might be fewer during a recession, the point of starting now is that the economy will (hopefully) be out of the recession by the time you want to exit (typically beyond 12-18 months).