Recession: Blessing in Disguise

“Recession” – The word definitely arouses a very pessimistic sentiment in regard to starting a new venture.

But if we consider another side of the coin, recession is a right time to start new ventures. This may sound little optimistic, since during this time people become very cautious with their finance and fear about future. Many people around the world think this is not the ideal time to start any business endeavour. But that may be not necessarily true; there are many large companies that started the business during recession like:

IBM – International business machine - It came into existence at the time of long depression of 1873-1896.

GE – In the middle of the panic of 1873 a six year recession, Edison created one of the best know inventions of all time – the incandescent light bulb.

CNN – It might be news giant now, but in recession plagued 1980 it was little know station called The Cable Network News. It revolutionized how the information is received by starting a 24 hour news channel.

Wikipedia – Was born during the recent 9/11 recession.

The list goes on, there are many more companies like Disney,HP, FedEx, MTV Network, google, paypal etc.

So, this leaves us with many unanswered questions that why recession is the time to start a new venture as none of the factors are favouring for start-ups. I will try to give some of the many reasons to support my point, I may be little optimistic but that’s the way you should approach life.

1) Recession forces founders to be frugal – I think that’s the way a start-up should be; run it as cheaply as possible. The most common reason for death of start-up is running out of cash. So lesser the operation costs the harder to kill. And what better time could you think then recession to cut down the cost since everything gets cheaper. Moreover stringent flow of cash will lead to creative thinking and lessons learnt in frugality are invaluable.

2) Start-up success or failure depends upon merit of founders or idea rather than the state of economy. The economy has some effect but certainly, it cannot decide the fate of a start-up. Which means what matters is who you are rather then when you do it. So for any given idea the payoff will be fast in bad economy than for waiting. Microsoft first product was a basic interpreter for the Altair, that was exactly the time when world needed it. If Gates and Allen would have decided to wait it would have too late. Above mentioned companies where born at time of recession and they succeeded because world required them.

3) A common perception about recession is that people become very conservative about changing the job, no one wants to leave the comfort zone and put their job to jeopardy. On the flip side the people who are leaving their settled job and joining the start-up will be incredibly committed, believer in founder’s vision, ideas, ready to take risk and work in Spartan conditions.

4) Adversity brings out best of the qualities of the entrepreneur that needs to be successful like guts, leadership, team working. This will help the start-ups in long run.

So recession may be a good time to start a start-up. It’s hard to say that above mentioned advantages outweigh disadvantage like circumspect investors. But it doesn’t matter either way what matters is the people not the circumstances.