Ask YC: How will the US economy affect the probability of startup success

Good god, pay attention to the world around you people.

1> different kinds of businesses do well in recessions vs. boom years. adapt your start up plans to be "countercyclical."

If you're not sure what kinds of businesses are countercyclical, are you sure you're old enough to be doing this?

2> prioritize international markets. capital bleeding out of the US because of inflation and currency shrinkage is going somewhere. those people are your customers too.

3> Flint, Michigan. Yes, it can happen here. Entire classes of businesses can just vanish. Programming jobs go abroad eventually (yes, yes they do - your professors are not the only smart Indians, Chinese, Japanese, Russians, Koreans, Israelis etc. in the world.) Which business are you in? Being smart guys? Or serving a particular customer base better than your immigrant professor's cousin who stayed at home can?

Do a bit of reading about the Great Depression. Now re-run that, maybe 50% as extreme, but this time with the internet. Where would you like to have been positioned in 1927 or 1928 to survive in good shape?

If you want a closer example, examine the Argentine Economic Collapse (1999).

http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999-2002) - you will have to cut and paste that link, including the bracketed dates.

We don't know that is going to happen but it's a scenario that should be examined in your mind because if a funder asks you "so what's your plan if the dollar drops to be 20% of it's current value against the Euro and the Yen?" the answer should not be "what are you talking about?"

In short: get beyond marketing to the American consumer, because there's a 5%-15% possibility that they're going to be entirely wiped out within the next couple of years. Think Former Soviet Union style conditions (relative to where we are even now.) Now try to imagine keeping your business going. Note the percentages - I don't think this is what will happen, but I'd say it's improbable-but-possible.

As a business person, it's a systemic risk that your business plan should take into account. If it doesn't, you're still in the little leagues, assuming that the relatively stable economic conditions that have prevailed during most of your life time are baseline reality. They aren't - that's summer. Winter may be just around the corner. Say 1 in 6 or less.

By the way, I also do children's parties, weddings and Bar Mitzvahs.

I'm not too worried. Weak dollar, rising oil prices and a credit crunch for mortgages isn't really going to affect the tech industry much. We're not a petroleum, credit or real estate based industry.

Rising oil prices mean that commodities that are distributed via oil based transport will be more expensive. Shipping widgets via plane train or truck just got more expensive. Our products are distributed electronically, so relatively speaking our products are going to be cheaper, and might be considered a better value.

Credit crunch and defaulting mortgages means that the banking and finance industries are going to be taking a bath for a bit. It's going to be harder for you to get a mortgage. I don't see that affecting the software biz much.

A weak dollar means that internationalization efforts will pay off. There are going to be more people in Europe, Canada and Asia that will be interested in buying American goods because American goods will be cheaper. It's time to make friends who know other languages to translate your site, and be sure that your programming language of choice has good Unicode support. Outsourcing just got more expensive, however because of the exchange rate differences.

Finally, that bottle of French champagne that you were going to drink at your liquidity party just got more expensive. That's a bummer. :)