Should You Start a Company in a Downturn?

Fabrice Grinda writes:

There is no better time to start a company!!

The opportunity cost has decreased as many high paying jobs have disappeared and employment opportunities in general have lessened. If you have a job, companies will have less room to give generous bonuses and/or raises.

It’s going to be harder for entrepreneurs to raise money, but competitive pressures decrease dramatically in downturns giving you more chances to establish yourself as the leader in your field and more time to do so. ….

When I launched Zingy in September 2001, we essentially had no competition. The online advertising market had completely dried up allowing us to buy billions of advertising impressions for $10,000! The lack of competition proved critical to our success given that it took two years for the company to start establishing itself in the marketplace….

One difference between today’s downturn and the 2001 dot-com bust is that the economic woes of 2008 seem to be hitting a wider range of industries. The dot-com meltdown started and emanated out of Silicon Valley. It was a good reason to start a tech company because, as Fabrice notes, there was ample talent, less competition, etc.

Today’s economic challenges are affecting many of the customers to whom a new company sells as well as partners in other industries and manufacturers abroad. Thus the external conditions are a little tougher, I think.

I read one blog post recently where a guy said something to the effect of, "There’s never been a better (or more necessary) time to start a company that fills a customer need, is efficient with cash, and can be profitable right away." Well, yes!

The fundamentals of business have not changed.

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