Ask YC: Is there a recession/depression coming?

The economy seems to be heading to a recession, but how will this affect the internet startup world? I ask because I am planning on quitting my job with the federal government to start my own startup in January. And no, I can't keep the job and do the startup, I've been trying for 8 months to do that. Is venture capital going to dry up? How about online advertising revenue? Should I wait until the recession is over?

I would say recession is kind of here, and coming (but def not depression, technically speaking the economy is going through depression, when it has been in recession for a couple of years and not coming out). but in terms of should you wait for it to go away, I really don't think so. If you have an idea then you should def implement it now, otherwise it will be too late for it. But you have to realize that if in case there will be a recession, then finding jobs might not be as easy either. So if you don't think you can live and sustain the startup life for a while, then you should be careful quiting your job.

Also, there is a lot of talks of online advertising revenues going down, and this might even damage companies like Google a lot. But if you feel like you have a product that would attract many eye balls then you should implement it without worrying too much about online ads, and also you might be able to either find a business model for it that doesn't solely depend on ads or find other interesting exit options for yourself,.

In terms of venture capital, it all depends on how much money your project needs. As many of the "web 2.0" companies don't require much capital to start, I wouldn't think it will dry up, but if more and more of them fail to eventually generate revenue, I would assume the VCs will get more selective. But since the capital needed is much smaller than the dot-com era I would hardly think that vc's will dry up. Of course that is IMHO.

I'd say we're very close to recession. Even Morgan Stanley says we're gonna enter recession soon:

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&#38...

I have had that feeling for about a year that there will be a pretty sizeable downturn coming, and it will probably last a fair while.

But only time will tell, there are a lot of factors, it could be delayed with interest rate cuts or forcing the teaser rate givers to honor those rates for a longer period of time, etc.

A recession is the best time to start a firm. Most companies make more mistakes and develop more bad habits when times are easy than when times are tough. It may take tough times to uncover the bad habits you developed and the unrealistic assumptions that you made when times were good, but it's the bad habits that are responsible, not tough times.

Focus on customers and revenue and a value proposition that's compelling even when times are tough. Sooner or later your startup will face tough economic times, sooner is better.