Jan 9 2009

start your business now!

While the financial world may seeming to be coming to its end and everyone’s natural instinct may be to baton down the hatches and not do anything to rock the boat too much, I think that now is actually a great time to start a business.  Our own experience suggests that many great companies start their lives in down markets and this view informs our belief that as early stage investors we should remain consistent in our investment pace in both good markets and in bad.

In fact, I think there are some great natural advantages to starting companies in a time when the markets are down.

There’s less competition. For money; for talent; from 10 other people who have a similar idea to yours. As a result it’s easier to to get above the fray (since the fray is smaller). 

There’s less pressure to get something out there NOW. With fewer new ideas starting there’s a little less pressure to push something half baked out the door and before its ready (for fear that someone will beat you to it) – a down market may give you a little more breathing room (real or perceived). 

You’re less likely to waste money. You know I think businesses have a tendency at all levels to spend too much. There’s nothing like a really tight market to make you look more closely at every dollar going out the door.

While it’s harder to get funded, generally better companies receive financing in down markets.  Maybe that doesn’t feel like an advantage (unless you’re an investor <g>) but actually I think both companies and investors benefit when financing is a little more difficult to come by. Fewer companies means less competition for talent, mind-share, market-share and overall less "noise" in the market. And lets face it – when markets are hot more bad ideas get funded (I was going to say "crappy companies" but don’t want to offend anyone . . . ). In tight markets more investor work goes into the front end of investments (shouldn’t this always be the case?!? A topic for another post) and fewer marginal ideas find financing. Those that do have a natural advantage.

You’ll be ready when markets turn around. Instead of starting a business when the markets being to heat up, how about having a product ready to go when the markets are on an upswing?

So go get ’em!