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Spot on.

I wonder if we will see more companies actually trying to make a profit, rather than pursue years of VC funding and then selling out.

We will see more businesses based on a sound financial model, spending less but doing more, rather than some “cool” idea that is actually pointless, just so they can IPO three years down the line.

Paul

I should add one more thing:

While it might be harder to get funding right now, it has never been cheaper and easier to get an internet based business up and running. With the likes of Google, Amazon, and Heroku providing cheap (or free) infrastructure that scales without you having to do much work yourself you don’t have to work at the scaling problem until you start getting really big.

It is now easy and cheap to try out an idea and see if it sticks. if it does, then you can worry about scaling. If it doesn’t, then you haven’t blown thousands on hardware, infrastructure and office space, that you now have to offload into a buyers market.

Paul

Great insight.

A “bad economy” is defined by the ENTIRE economy. A single business is so small in the grand scheme of things, the economy is only one of many, many factors.

I am a business owner, and our client roster has exploded in the last six months, simply because we’re hitting full stride and we a lot of things better than our competition. And we’re not what you would call “price competitors.” We charge what we feel is right without exception.

A bad economy gives you the opportunity to start out with a lot against you. If you can survive a bad economy, your business will probably only get stronger as the economy improves. On top of that, that initial “necessity” of needing to be frugal and tight with your bank account will carry through the years, even as the economy begins to recover.

With every downturn there is opportunity. Not to take advantage of people, but to help provide services that are a more efficient solution to their business or just life in general. Opportunity exists, you just might have to work a little hard to find the door and walk through it.

And to Saverio’s point, an entrepreneur that weathers a downturn (especially a downturn as significant as this one), earns an extra degree of respect from the folks that matter.

Lenders, investors, prospective employees, prospective partners, and prospective customers will all remember this challenging time, they’ll remember all the people they watched go under, and they’ll appreciate the stamina, perseverance, and grit that it took to overcome the turbulence of 2007 to 20XX. A few years from now, when they choose which horses to bet on, they’re more likely to bet on the ones that succeeded today.

I disagree, in that I believe ANY time is a good time to start. Just start. Take action. Planning and scheming are often just excuses to procrastinate.

That’s my opinion.

I would think the one negative to starting in a bad economy is the lack of customers willing to spend money – or having the money to spend.

That’s a good point Joshua. But I think it’s more subtle than that. Businesses (customers) can see the value in your service during a crunch time, but still allocate their resources to other activities. If there’s less money to spend, there’s less to spend. They may want to implement your new wizbang and they may know that it will improve their bottom line, but they may only be able to get by with their old approach so they can maintain their present state.

Even more PG nonsense. This recession/depression will last until 2010-2011. Starting now means you will have tough time for over TWO years! Good luck!

A smart person would:

1) Make sure they keep their current job 2) Maybe, and I really mean maybe, work on a site on the side but keep it low 3) Think about “starting up” in 2010.

I like this point and I’ve made it myself.

Markets shift—that what thy are intended to do. Major shifts mean major opportunities. You’ll need to find a business model where liquidity is not important though.

Also, I don’t really agree with your follow-up… it’s not really a valuable constraint (though I get what you’re trying to say). It’s just something you have to live with.

Joshua -

I agree with what you are saying. There are always exceptions. My experience is with selling expensive enterprise software and projects and I can definitely attest that spending does go down on some software and projects when the customer has to tighten the belt.

I contend that now is an awesome time to start a company.

- Labor is readily available and affordable
- Rent is readily available and more affordable
- People are realizing that their corporate job isn’t as secure as they
   thought it was
- There is less competition

And if your startup offers people a way to save money on something, you can’t ask for a more perfect scenario than a huge recession.

David,

I am seeing enterprises that are coming to us to build solutions tailored to the need and on top of open source stacks.

This in contrast to their usual expensive so called enterprise portal based solutions built on top of enterprise application servers with hefty licenses.

There are times when people think more about smart spending and being more efficient.

It is far fetched to imagine an IT manager rolling out a 2 year SAP integration project these days.

Yet many will turn to small shops for a small project that will yield them good value for the money they spend.

These are times where real value as opposed to bullet point value rules

Companies are cutting back on a lot of things they would rather keep. Find a way to provide those things for less and you have a market.

For example, lots of companies have cut back on travel, so face-to-face meetings are out. But some sort of communication is still necessary. What do companies still need even if they can’t get the f-t-f? Campfire, Skype, and . . . you.

I think people should start companies based on when there is a market large enough to sustain them, and future growth potential to make them rich. Unfortunately, in America people are too busy chasing fads, and running up debt to actually think about business. Instead they think about “start-ups”. The latest catch phrase is always the thing that brings the economy to a halt within it’s decade. Learn more at my site Jupiter Marketing