Re:Ask YC: Is there a recession/depression coming?
by fauigerzigerk on Tuesday December 11, 2007 @04:04PM
(#88388)
That sounds logical but unfortunately it's not that simple. In 2001 I was part of a telecom related startup. All of the telcos were severely affected by the downturn, not just the bad ones. After the bubble burst nobody would do any deals that didn't have a positive effect on the balance sheet within that same quarter. So, effectively, they just stopped to launch new services. They all just stopped at the same time. Period. End of story.
So my advice to CarpeDiem is this: In a recession even more than at other times, don't depend on big deals you have to close in order to survive. Lots of small customers that value your product and pay real money is what you want in that situation (and probably in any situation). I wouldn't rely ad revenue either because it's notoriously volatile in recessions.
Ah yes, before I forget (although I'd rather like to forget that) we did actually have venture capital funding, but the VC went bankrupt before the second (already agreed) round of funding went through. And that VC was a subsidiary of a major corporation, an icon of stability, not reliant on the tech or telecoms sector, but it still went bust :-)
All a recession does is trim the excess baggage from the economy. Companies that aren't the most efficient, and from the startup world, the concepts that aren't the most profitable or capable have difficulty. The rest make a little less, but get by.
IMO it's the best time to start something, since you'll be thinking "worst case" right off the bat. This should help your decision making. You'll naturally want to risk less and will be more deliberate with the directions you follow. You'll have a stronger, more efficient organization than you would if you started during a boom time.
Then, as the economy brightens and you emerge, it'll be gravy train time!