Why to Start a Startup in a Bad Economy
paulgraham.com
paulgraham.com
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 FAST. My prediction is that you will see more companies trying to start monetizing their web-app soon. FWIW, TipJoy is well positioned to take advantage of this if my prediction is true.
Of course, I've always been a hardware/product startup hacker, but I've had a couple of rounds in software and Web 2.0 companies. So, I'm not as immersed in web-app funding cycles as some others here are.
I would look to solar and certain other viable alternative energy options right now as the next major tech growth sector. I think the tech startup world needs to see more "inventions" (again, admitting my own bias).
While many here may disagree with me, one of the problems with web-apps is that while they are cheap to get going (relatively speaking), I think that the saturation of non-revenue producing web-app companies, coupled with the low cost of starting them, will make many traditional VCs look elsewhere for their next investments. The web-app community needs more investors like YC, that keep the investments and process realistic.
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?
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:
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.
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.
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.
So it depends if you want to be "well off" (Stallman), "obscenely rich" (Torvalds), "shockingly rich" (Jobs), or "embarassingly rich" (Gates).
And I think that most would, given the choice, rather be the BDFL of a project they obviously enjoy (Torvalds), than spend all day in meetings, or managing management, or whatever Gates has done for the last decade. Unless you're a masochist, or a megalomaniac.
And besides that, lightning has to strike the same place 200 times before you make it to the 99.9th percentile.
"I'm trying to make a living; if you're trying to make a killing then you're stuck in the system."
I've heard rumors that Torvalds wishes he had the money Jobs and Gates have. So, yeah, a little unhappy.
>And besides that, lightning has to strike the same place 200 times before you make it to the 99.9th percentile.
That's if you're in a bell-curve. If you're in a zipf-distribution, lightning only has to strike once.
It's not a bug, it's a feature.
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.
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.
(Here, "better" = chance of becoming profitable, and relevant to the web, for the long term; "better" != chance of cashing out for megabucks within a year or two; i.e. "better" for me as a web user.)
EDIT: Just to be clear: That doesn't rule out enterprise applications. People in companies have needs too!
So starting up now, founders should ask themselves-- what's liquidity look like in 3-5+ years? The correct answer is, "I have no clue"-- but if you start now, you'll probably have a better shot at liquidity in 3-5 years because all of the other hackers went to grad school. ;-)
On the contrary, potential startup founders will have more reasons to think of their projects as businesses - trying to grow revenues, not traffic. And to get revenue, you have to solve real problems.
There is a hidden assumption in the above: it assumes that a startup's competitors are other startups, not established firms. Established firms have easier access to credit than startups. (They can fund new lines of business out of profits from existing lines of business, for example, which is a form of "access to credit" for the sake of this discussion, which is about starting new lines of business -- i.e., exploiting new markets.) This is a real disadvantage of startups relative to established firms, and the disadvantage gets bigger because of the economic downturn, but the disadvantage of being an employee of an established firm when lots of job hunters are in the market might get even bigger.
There are ways in which startups have been able to neutralize the funding advantage held by established firms. One big way is to be more agile. "Agility" means adopting new technologies and entering new market more quickly. Changes in technology and changes in markets and potential markets continue to occur during economic downturns.
Sorry for the plug, I just thought it was funny that we're on the same side of the equation, when everyone else in the world isn't.
It seems to me that somewhere along the evolution of the internet we forgot the golden rule of any business:
If you make stuff people want, they'll pay for it (either directly or indirectly), and you'll make money. Recession or not.
Clicked through to Bountii, and then onto their API TOS, and found this:
"[you agree not to] use the Bountii API to operate nuclear facilities, life support, or other mission critical application where human life or property may be at stake. You understand that the Bountii API is not designed for such purposes and that their failure in such cases could lead to death, personal injury, or severe property or environmental damage for which Bountii is not responsible;"
Me he heeeeeee
(I did once use Java for offline processing of data at a nuclear reactor research facility, but human life was obviously not at stake.)
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.
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
But I was thinking, "If the economy is stopping you, you're not the type to start one."
Up until this month, I've had trouble finding A-list programmers because I don't offer a large salary and benefits. This month, I've suddenly found it easier to attract high-skill employees and I expect it to get easier still as the recession deepens. Many are involved in loss-generating startups which they anticipate will soon fail as funding dries up. (Not all these experts choose to return to grad school...some, for instance, are too old for that culture shift or don't have liquid assets to sustain them.)
As you discuss, the recession may make it easier or harder for startups depending on their value proposition and their reliance on additional investments. I encourage you to write on how easier access to expert programmers changes the equation. In my case, I must decide whether to commit our resources to, say, hire another brilliant programmer because it's now possible OR to hold at our current headcount to maximize survivability.
Another variable is whether brilliant hires in this economy are likely to stick with the company when the economy improves in, say 12-18 months. An HR expert who's weathered a few of these cycles pointed out that while it's easier to hire good people in a recession, some of these hires are more likely to jump ship when the economy turns around. I think the description would be "fair weather hires".
Also, I know pg says that not being able to find a cofounder after a certain point signals a lack of competence or a bad idea, which is generally of correct, but also realize that in some areas finding a cofounder is literally 10x harder than in others-- independent of the merits of the founder or the idea.
More to the point: To me, a startup isn't about money. It's about freedom. That's where I've found much to like in his essays.
So who should start a startup? Someone who is a good hacker, between about 23 and 38, and who wants to solve the money problem in one shot instead of getting paid gradually over a conventional working life.
So writing about startups is always implicitly about making money. (Not that there's anything wrong with that.)
http://en.wikipedia.org/wiki/Law_firm#Salaries
Typically, you're about $160k in debt from law school, so the first year is spent paying that back. The next 4 years taken together is only $795k, nowhere near enough to retire for life. All the associate years together is only about $1.6M, still not enough to retire after 11 years.
Then you have to make partner; if you don't, you're out of the firm and usually have to set yourself up as a sole proprietor. If you do make partner, you're set for life, but at 11 years getting there, the road is nearly as long as becoming a tenured professor and usually longer than becoming a successful entrepreneur.
But back onto Mr. Graham: Since I'm a "hacker", I already know a lot of stuff he knows about software development, and in fact it's clear that I also know a lot that he doesn't address in his essays and probably isn't even aware of. I mean, I'm a video game developer who writes in Java on Windows machines, and I've got good reason to be such. Why should I pay attention to Mr. Lisp here who scorns Windows and has never used Java, and who doesn't even mention playing games, let alone programming them?* I'm sure I could learn some things from him, but he is ignorant of my world, however much he may know about his own kind of software development.
He is far from ignorant, however, about startups. And he's got interesting things to say about various other, non-technical subjects too. So let him talk about those!
* I suspect there are plenty of Mac fans and Lisp fans and C++ fans among this site's readers who could snappily answer this question. I do not have time to armor this comment against techie criticism; that would itself require an essay. Suffice to say that I claim I could if I wanted to. :)
And incidentally, it's not the making money aspect of startups that interests me the most. I'm mostly interested in startups as agents of change. We could right now be in the middle of a shift on the scale of the Industrial Revolution. Or not; always hard to tell from so close. But there is certainly something interesting happening.
"I'm afraid to say that admirers can be a tremendous force for conservatism, for consolidation. Of course it's really wonderful to be acclaimed for things you've done - in fact it's the only serious reward, because it makes you think "it worked! I'm not isolated!" or something like that, and it makes you feel gratefully connected to your own culture. But on the other hand, there's a tremendously strong pressure to repeat yourself, to do more of that thing we all liked so much. I can't do that - I don't have the enthusiasm to push through projects that seem familiar to me ( - this isn't so much a question of artistic nobility or high ideals: I just get too bloody bored), but at the same time I do feel guilt for 'deserting my audience' by not doing the things they apparently wanted. I'd rather not feel this guilt, actually, so I avoid finding out about situations that could cause it. The problem is that people nearly always prefer what I was doing a few years earlier - this has always been true. The other problem is that so, often, do I! Discovering things is clumsy and sporadic, and the results don't at first compare well with the glossy and lauded works of the past. You have to keep reminding yourself that they went through that as well, otherwise they become frighteningly accomplished. That's another problem with being made to think about your own past - you forget its genesis and start to feel useless awe towards your earlier self: "How did I do it? Wherever did these ideas come from?". Now, the workaday everyday now, always looks relatively less glamorous than the rose-tinted then (except for those magic hours when your finger is right on the pulse, and those times only happen when you've abandoned the lifeline of your own history)."
That's a really bad place to put yourself. My business ideas are pretty far from what I see discussed here, but I still get a lot of useful knowledge from hanging around. I'd say that the fact that the startups here are different from what I'm likely to do is valuable in its own way: forces me to see the common technology from another perspective and that itself generates further ideas.
Internet of things? ~ http://en.wikipedia.org/wiki/Internet_of_Things which Bruce Stirling has been writing about (Shaping Things, 2005) ~ http://en.wikipedia.org/wiki/Spime#Novels Ipso? (IP for Smart Objects) ~ http://www.google.com.au/search?q=Ipso+ip+smart+objects IP enabled things when IPV6 rolls out? These ideas are related to this article ~ http://news.ycombinator.com/item?id=333542
I'm guessing a lot of the revolutionaries in the Industrial Revolution weren't thinking so much about causing a revolution. They were "just" trying to get rich.
http://www.paulgraham.com/avg.html
http://www.paulgraham.com/road.html
http://www.paulgraham.com/gap.html
PG has it exactly right. Startups are HARD and there are so many factors that are more important than the state of economy.
The odds of success are low enough with a startup already that the economy shouldn't really change the decision making process.
Hmm, isn't that kind of a low bar? I worry that I'll be 40 before I know it, with no savings to show for my years of work. Isn't opportunity cost a concern?
Perhaps PG really is writing for the young.
Angels probably should. Many of them just had a 20%+ decrease in their net wealth. Investing is an activity for them, like golf, not a profession. They shouldn't make themselves feel uncomfortable financially.
There's a difference between which action has the highest EV and which one you should take.
It may not be 0, because he may have had other expenses and investments that he prioritizes angel investing over, but it probably won't still be 20%. The total dollar amount he'll be willing to stick into high-risk investments will probably decrease.
I'm talking on average, of course. Each individual will vary according to their net worth, lifestyle, investment philosophy, etc.
I'd also like to see more "inventions" (another good point from brk). There may be a certain amount of critical mass of development that has to happen around other technologies. The last 10 years or so have seen optimization in the development cycle for web apps, resulting in their relative low barrier of entry today. It could be my ignorance, but I don't detect the same level of commoditization in other industries. Of course, a higher barrier of entry is great for the people already involved.
Another way to look at the "inventions" issue is the rather quick evolution of non-web technologies to web accessible interfaces. We've seen this happen with telephony, video, radio, print, television, navigation, security systems, and many more, I'm sure. It's pretty amazing actually. I think you'll continue to see more of this over the next few years, so we'll all still have stuff to work on.
This is confusing -- wasn't Y Combinator started in 2005? Was PG funding startups before that?
Thierry Hubert
However I balk at the Declaration of Independence as the basis for this. It is part of cosmic law that seemingly disparate parts be unified as events in time and space.
The time prior to now was more available to this awareness, but incompletely conscious of this underlying basis for justice, commerce, etc. We have no pants, basically.
The internet has exposed this issue we have of whether to actually work for the true common good, for the Universal interest and no a niche freedom like americanic liberty or romantic imperial entitlement, or whether we are doing the fun thing - being king, being the man, being the world authority, but not the real, messy, selfless, egoless world leader. The leader serves the universal interest. The merely free do not have this underlying responsibility to the people. Whether in america, rome, babylon, sumaria, russia, the little people and the heavy heavies must be on the same platform, or there is no genuine premise of law.
So that is the dynamic under the problem internet companies have. Solving the underlying dynamic will be required to solve the problem on top - revenue. Once this dynamic of congruence with the universe fruits, as it is today, there will no longer be quixotism in human interactions.I agree that felt-value constitutes reality in business, on both sides, the value of having a vendor and the value of having a client, both orbiting a meaningful transaction.
However I balk at the Declaration of Independence as the basis for this. It is part of cosmic law that seemingly disparate parts be unified as events in time and space.
The time prior to now was more available to this awareness, but incompletely conscious of this underlying basis for justice, commerce, etc. We have no pants, basically.
The internet has exposed this issue we have of whether to actually work for the true common good, for the Universal interest and no a niche freedom like americanic liberty or romantic imperial entitlement, or whether we are doing the fun thing - being king, being the man, being the world authority, but not the real, messy, selfless, egoless world leader. The leader serves the universal interest. The merely free do not have this underlying responsibility to the people. Whether in america, rome, babylon, sumaria, russia, the little people and the heavy heavies must be on the same platform, or there is no genuine premise of law.
So that is the dynamic under the problem internet companies have. Solving the underlying dynamic will be required to solve the problem on top - revenue. Once this dynamic of congruence with the universe fruits, as it is today, there will no longer be quixotism in human interactions.
Beautiful. Declaration of INTERdependence time?
You should have to explain how it's going to make money, no matter the economy. Founders need to stop thinking they can just magically monetize later after reaching one fobillion users. If it happens, awesome, but don't bank on it. Google was an anomaly, but you wouldn't know it from the attitudes of others towards them.
I agree that you shouldn't bank on getting this fobillion users and after that monetizing them. But that's because the real hard part is getting that much users in the first place.
That's not to say it's the only valid strategy, but it's certainly a valid strategy. In fact, it probably has the highest payoff, albeit with the highest variance.
I think it is safer to go the long route and start small, working your way to the top, charging a price right from the beginning. If your application is useful, users will pay for it.
Charging up front puts people off, whereas if you slowly incrementally introduce revenue later, they will probably be hooked by then.
When you're starting to charge for existing features, by limiting the free accounts, you will surely upset your existing users. Google tried to introduce advertising in YouTube videos, and the community was not happy about it ... and imagine a site like YouTube placing a limit on how many videos you can watch. No matter how hooked your users are, you still can lose them, not to mention that popular services like YouTube got cloned and there is competition waiting for those users.
People have been charging money or other goods in exchange for products/services since forever. I don't really understand this trend of releasing products for free. The only viable exit strategy is for your company to be acquired by a big player, but if you want your business model to be sustainable you should question this trend.
-Youtube might have been fucked if it didn't get acquired. It was hemorrhaging cash like Pac Man Jones & Robert Downey Jr. trapped in a strip club.
-Flickr was _priced_ like a talent acquisition.
-Like most acquisitions, the Myspace acquisition has largely failed according to Google, their primary advertiser. Additionally, Myspace's contribution to News Corp's earnings have been piss poor.
I agree that it's a valid strategy (especially for a company like Justin.TV), but IMHO opinion most companies have tunnel vision when it comes to turning in to a real business. It almost makes them risk seeking. Although getting acquired is nice, it sure as hell isn't a strategy - it's a cop out.
I'm trying to come up with companies that tried this strategy and either worked (issued dividends continuously) or was acquired and actually benefited (i.e. was worth their acquisition price based on DCF) their acquiring company. I'm sure there are examples, I just can't think of any off the top of my head.
Sites like youtube and myspace did not need to worry about the monetizing part as they got acquired quickly, had they not, maybe the story would be different. I still can't think of sites with a huge and active userbase that failed.
Anyway, all I'm saying is too many people are applying the blanket statement "worry about monetization later" when not all of them should be.
In my opinion, it can be easier for businesses to reach the tipping point of paying customers (i.e. break even) vs. the tipping point of users (???, profitability?, acquisition?). I think MM touched on this.
Myspace hasn't show itself to be a real business yet and either has Youtube. I still can't think of user based acquisitions that have quantifiably proved themselves to be a wise decision, though I think Youtube will.
Completely agree, but the possible payoff in the latter case tends to be quite higher.
>Myspace hasn't show itself to be a real business yet and either has Youtube. I still can't think of user based acquisitions that have quantifiably proved themselves to be a wise decision, though I think Youtube will.
I think that's hard to say. Take hotmail for example, while it might have not generated a $100 mil in revenues yet (or maybe it has?), I would doubt that the purchase was a strategic decision they regret over at Redmond. I think the same could be said for Youtube. If NewsCorp has regrets over the MySpace purchase, they are quite likely much more due to FB´s growth than to MySpace's current revenue.
If all these companies decided to grow users before revenue when they where a startup, it makes little sense to try to squeeze revenues quickly out of them, at the expense of user growth, once they've been acquired by a company with much larger pockets. I think the logical thing to do, in those cases, would be to continue the same growth strategy for a few years while calmly exploring ways to monetize them.
Startups that don´t get acquired are obviously more pressed to find a way to monetize quickly.
I'd bet it's way more than that due to volume, brand recognition and since it directly circulates hotmail users to microsoft properties. But similar to you, I don't know either. However, I think that's a great example of a user acquisition that has worked so far - thank you - I was having problems thinking of examples.
Not to sounds too 37signally, but what about the freemium model?
I also think micro-payments can be an option one day when someone gets around to making it less painful and more available. I think this will probably involve cellphone companies but I digress.
In any case, I think selling ads can be a very profitable route for others.
MySpace's acquisition hasn't failed: it's a profitable enterprise for NewsCorp and still growing. It paid back the purchase price in the first year! So that's a success, not a failure.
The jury is still out on YouTube, Facebook, and Flickr as to whether they will be long term businesses, so they are not yet data points one way or another. They are clear success stories for the founders though.
"Among the biggest internet companies, most of them followed this strategy."
You could be right, but I honestly have no idea. What sources are you using? How are you measuring this?
"It paid back the purchase price in the first year!"
Wait, what? Revenue or profit? Revenue > Acquisition Cost != success.
"They are clear success stories for the founders though."
Definitely, which is probably the most important thing of all.
Yahoo - users before revenue, success
Google - users before revenue, success
YouTube - users before revenue, undecided
Microsoft - revenue before users, although their internet properties consistently lose money. Not really an internet company.
MySpace - users before revenue, success (MySpace is profitable already)
Facebook - users before revenue, undecided
Blogger - users before revenue, probably a success although google doesn't release numbers so it's hard to say how much money they make on it
Orkut - same as Blogger
RapidShare - users before revenue, success (very profitable freemium model)
Baidu - I'm not sure. I presume they follow the same path as Google did, but with an obvious example of how to succeed already in place.
QQ - users before revenue, success (virtual goods turn out to be a great way to monetize a free chat product in China)
eBay - revenue before users; they didn't make auctions free
Hi5 - users before revenue, undecided
In addition to being the biggest internet companies, these are among the most profitable. Several of the top 20 were acquired by other companies, making it difficult to judge how successful they would be independently. Several are still so new it's hard to tell. There's exactly one which took money over user growth (eBay).
One quick nitpick: I'd argue Rapidshare had a business model before users, even if it technically had users before revenue.
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}I've got 3 different ventures going on right now that I've been working on for 2 years, 1 year, and 6 months, respectively. The one that's 2 years old I won't be ready for venture capital for another 2 years probably. The one that is a year old could theoretically be ready for funding in another year, and the 6 month old I'm hoping to not even seek funding, but to just grow from the ground up into a profitable business a year from now as well. The three somewhat interconnect and can use features of each other, which will hopefully help propel each towards success. Either way, I'm taking advantage of the current recession as best as I can. Pageviews are up, my alexa traffic rankings are going the right way, and revenues continue to increase. All good signs that sometimes it's a recession that helps startups. :-)
A point that seems lost in pg's recent start-the-startup cheerleading is that you need to be able to eat, pay rent, etc. Even if you're in your 20's and have a good chunk of money saved up, how long will it last? A year? Two? What if you don't see a paycheck for that long? Will there really be that many tech jobs available to "fall back on"? Part of the definition of a recession is a contraction of employment. That means tech jobs are less available, too.
These reality checks shouldn't stop anyone, but it'd be nice to see a reminder from Graham once in awhile to do the maths (personal budget etc.) and be realistic. A lot fewer tech workers are in the financial position to start a startup than they realize.
Ramen money indeed!
That is reality. But it is also reality that these kind of amounts (if you're careful in what you're spending), can be earned in a few days a month doing something you're good at. Just trust in your own qualities.
I suppose I could try inventing something new. Now is a great time to do it. Of course, I will probably fail, but so what. If I make time to do it, I will certainly have at least a bit more time to ride my bike around and stall that looming congestive heart failure.
But seriously, if you have a little bit of cash, or better, still have a bit of cash coming in, extra help won't get any cheaper than it is now. If I'm in Europe, I'll outsource to the USA.
We never tried to make money - it just happened. Sure, it was much closer to Stallman than Billy Goat, but it paid for the house and will send my kid to MIT.
You are right. It is all about cost containment in times like this and providing a cheaper alternative is the ticket. That is why I started http://www.dynamicalsoftware.com with its flagship product http://www.code-roller.com whose vision is a marketplace of entrepreneurs, evangelists, experts, and enthusiasts of software development that uses time tested, best-of-breed SDLC deliverables and work flow for a higher quality, faster time to market, yet more affordable alternative to getting custom software done.
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.
I also agree strongly with the consequences of fear, and how everyone else seems to be cowering in the corner. I am on the tech train and I have it almost entirely to myself. I recently attended some security functions, and it suddenly hit me how this field is begging for innovation. Of all the products and all the big name providers, it was nothing but me-too and do-it-again in a different package. Everyone I talked to from sales to tech, wanted one thing and one thing only - to play it safe and keep their job.
A startup might be affected by:
Customers/market - These are not necessarily the problem. True. Particularly if you are evolving in this economy, Like a Neanderthal in an ice age. This point is probably neutral on average.
Investors - This may be a problem. This is a market that can shy. But only a problem if you need them. This point is negative.
Buyers- (Of some description) Definitely a negative. But you don't need them right away & you can probably be more flexible waiting for the right time. If Cockaroach doesn't do it.. endospore.
You can't have everything. Comeptitors - A plus. Fewer investors (including founders as the essay implies) by definition means fewer startups.
Tom Williams http://blog.innogage.com
You just reinforced what I have been saying to people about what I'm doing as a one-man startup with phreadz.com in these tough, cold times.
People are out there building, or trying to build solutions to problems I have already solved on my own. So, now I can save them a whole lot of time and money by providing a solution for them right now. Hopefully this will help get them where they want/need to be without over-spending.
Also, the fact that investors and clients will get a good deal now, if they jump on board now is a good thing, so we can all reap the benefits on the up-swing.
Thanks for yet another great article.
Kosso Founder : Phreadz.com
The line I found most valuable, is the reason I first decided to start a company. 'Markets don't "reduce headcount."' the most security you can have is working for yourself... or the government... but I think most of the "startup types" dread the idea of the bureaucracy. We like the freedom to rise or fall based on our own abilities, the freedom to make something that is going to change the world. The majority of hackers I know are revolutionaries, not reformers.
the exogenous nature of technological progress has always been independent of GDP growth. When the economy grows and consumption is booming, tech firms and start-up founders benefit yes, but then it's like waiting for a sunny day to go for a walk.
You could go for a walk any day and get the same benefits: exercise and sight-seeing. In fact, too much sun might hurt you but you could always learn to get creative against wind/rain (coat and umbrella).
I guess what I'm saying here in case you're lost is that a recession is bad weather than need not distract tech start-ups from flexing their muscles. If you could make it in bad weather, chances are, you could enjoy more success in the sunny weather!
I don't want to say I agree that one has to launch a start-up during recessions only. Obviously, the most ideal time to start one is to know you can make decent money and a product that solves an important problem, be it in a good or bad economy, because, statistically, recessions are shorter and milder than before and expansions longer.
In the end, it is not a question of when, even. It remains a question of how.
(1) The probability of success is equal whether you start a startup in a good or a bad economy.
(2) The probability of success is greater if you start a startup in a good economy.
(3) The probability of success is greater if you start a startup in a bad economy.
This latest essay is a bit ambiguous as to whether it's defending (1), (3), or (2)-but-not-by-much. Which is it?
We're certainly planning on your main thrust to be true with our new platform. To that point - here's our latest blog post: http://tinyurl.com/6blrvl
Potential investors welcome!
Sramana
Eh? Every expert I've heard lately is fearful we're headed towards a repeat of the great depression. The one during the 1930s... not the 1970s.
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.
That's one of the most bad ass business quotes I've heard in 2008. Nice PG!
(btw, I started a new company this year and would add that it's much easier to hire GREAT people in these types of markets.)
Dudu
http://www.pollenizer.com/?p=25
And as Chris Hitchen from Getprice.com.au said the other day;
"A recession? Is that when a user comes back to your site again and again?"
It is all about mind over matter.... good or bad.... A positive minds looks at problems as opportunities and other mind vice versa...
As you mentioned the success or failure depends on founders rather than outside....
We were ahead of the curve on this one.
Michael Kassing MarkTend.com http://marktend.com
p.s. Can I translate this article to korean?
http://www.web30.ru/2008/12/04/zachem-zapuskat-startap-v-kri...
www.overcomingbias.com/2008/11/fund-ubertool.html
One thing I would like to add: In India, during booming times one problem startups face is finding good people at affordable rates. The demand supply equation is so bad that someone with 2 years experience in any sort of hacking will land a job that pays x+n where x is the current pay and n substantial percentage of it. Now in tougher times people would be willing to join and also stick around.
Thanks PG.
For sure, these are not average times.. :)
Thanks Pg, keeps our spirit going!
(8 dismal failures, twice wealthy, once almost made the rainbow)...
keep it up...
you're almost my hero... :-)
(really hard to beat out my father :-)
Working on a site web2.0fuckedcompany.com if you want to help....
- Varun www.homecamera.com
"Technology trains leave the station at regular intervals"
mean?
www.abhayatech.com
myteev.blogspot.com
Having money is key. I'm funding this startup with my inheritance but if I don't get funding or the site isn't making enough dough by Valentines day the site will crash and burn and then I'll have to sell my car and I don't want to do that. I sold my car for my first startup and that was the biggest mistake I made in my entire life. Life is much more difficult without a car.