Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why to Start a Startup in a Bad Economy

paulgraham.com

Post reply on HN
Print view View original

21–30 of 204 posts

Re: Why to Start a Startup in a Bad Economy

#21

Post by edw519 »

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.

Funny, you can take the exact same software and position it as a totally different product in a different economy.

Instead of "This software does a better job," imagine, "Our subscription fee is 10% your current cost of ownership. How will that affect your budget?"

Once your customers start shopping with a "recession mindset", you'll already be positioned before your competitors.

Without changing a single line of code.

Re: Why to Start a Startup in a Bad Economy

#23

Post by jon_dahl »

incomethax wrote: post #20
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).

Agreed. With some exceptions, startups are more like marathons than sprints. Investors often look for an exit in ~5 years, while too many founders think that they'll be out, as a success or failure, in 18 months.

Re: Why to Start a Startup in a Bad Economy

#24

Post by mrtron »

Great point. For some more anecdotal evidence, check out the first tech company I worked for:

http://finance.google.ca/finance?chdnp=1&chdd=1&chds...

Immediately after the dot com bust, they were acquiring companies and hiring like crazy. The general pace of the stock market had little to do with how they were performing. It was a bit surprising considering they produce an enterprise software package and you would expect sales to be heavily tied to the market. But they produced a quality product that people wanted, and were able to push the knowledge management/collaboration angle well enough that companies felt like it was an investment they were making.

Re: Why to Start a Startup in a Bad Economy

#25

Post by shimon »

Alex3917 wrote: post #16

"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

Think of it as an easy way to screen out people who would be uncreative and uncommited. Less signal, but a higher signal to noise ratio.

Re: Why to Start a Startup in a Bad Economy

#27

Post by zhyder »

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.

Technology doesn't evolve independently of a market for it. While "make something people want" is true in any economy, the problem is that what people want changes with the state of the economy. So startup founders need to reassess the market for their products (building iPods or building pacemakers?), and I'd guess many will decide this is not the right economy for their startups, and some will now discover new opportunities.

You do touch upon this a little bit in your article, where you mention startups that save customers money will succeed more in a bad economy. But I thought the more general assertion wasn't made.

Re: Why to Start a Startup in a Bad Economy

#29

Post by alecco »

mrtron wrote: post #24

Great point. For some more anecdotal evidence, check out the first tech company I worked for: http://finance.google.ca/finance?chdnp=1&chdd=1&chds... Immediately after the dot com bust, they were acquiring companies and hiring like crazy. The general pace of the stock market had little to do with how they were performing. It was a bit surprising considering they produce an enterprise software package and you would ex…

Yeah, buying on recession is great. But you have to have the cash first. Not exactly a startup situation.

Re: Why to Start a Startup in a Bad Economy

#30

Post by robg »

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…

Right, you have to build something people want - not something companies want. Solve the first and the second will always take care of itself.

EDIT: Just to be clear: That doesn't rule out enterprise applications. People in companies have needs too!

Post reply on HN