Crayond Blog

Why a Recession is a Great Time to Launch a Startup

A bad economy is not a bad time to start up.

Yes, you read that right. Most founders worry that a global recession can kill the business or slow down growth due to Corona Virus. True, the pandemic has brought in changes across the world. The world’s economy is in a standstill and slowly deteriorating. Tasks that involved travel are in a pause, people wake up without knowing if they still have a job, organizations incur a loss that they may have never seen before. 

But, if there is someone who shouldn’t worry about this potential recession, it is the entrepreneurs. It is a great opportunity for entrepreneurs to start their business, and here is why. 

Why should you consider starting now?

1. Necessity 

Necessity is the mother of innovation. Needless to say, the world wide lockdown has created a lot of problems. And, people are looking out for solutions to these problems. This opens up a new opportunity. If you take a deeper look, you will notice that most of the local vendors started selling daily essentials, which was not even their branch of business earlier. Try applying this concept to the larger audience. Because of the pandemic, the normal life has changed and we all need to accustom ourselves to the new norm. With the new norm, comes new problems that need solutions.

2. Cost effective solutions

Nobody knows how long this situation might last. Therefore, most people are looking at saving money. Most organizations have come up with a 24 months survival plan, where they can go ahead and run the company with just the MRR. In this situation, people and businesses are starting to look at cutting costs and moving down to a cheaper solution. As a nimble startup, if you have a perfect sales pitch and can provide a cheaper solution to their problem, you can easily crack a deal.

3. Easier to find workforce

As most giants layoff their employees to adjust costs, more talents are looking out for jobs. These are highly qualified, talented and trained individuals. Now, on a normal time the demand for these individuals is high, but if you look at the supply chain, it is terribly low, as most top tier companies would have hired them. During the recession, the demand for these talents is low, whereas the supply is high. If you are able to secure good funding and have a proper growth plan, you will be able to find effective individuals who will be able to elevate your idea. 

4. Everything is cheaper

Because of the tough times, people and businesses start selling off their assets. It is a great time to acquire things such as equipment, office space and labor. Most vendors are likely to offer larger discounts and sell things quickly. Downturns give you a strong negotiating power with the vendors. If your company need products from suppliers, you can negotiate and get a great deal.

5. Competition is low

On a normal day, the number of people who want to start up is high. Economic times revealed that in 2019 alone about 1300 companies started up in India. Most of these companies go right into funding, squashing bootstrappers.  In times of recession, there is a dip in this, which opens up the gates of funding for those who prefer to start up. 

If you have funding on the top of your mind, you should take a look at this graph. This is the data from the great recession that happened in late 2011.

Although the deals are smaller, it looks promising to kickstart. With fewer competitors coming up with ideas, you have a larger chance of getting funded. When the economy is down, most angel investors look at moving their funds in the stock market. If you have a great product idea, the chances are higher for you.

6. You will grow as a company

A startup that is built during testing times incorporates a lean and efficient work culture. The things that you learn now will help you build a strong team and later turn out to be your strength. It also builds a strong client relationship and enhances the confidence that your customers have on you.

7 Successful Businesses that started during the recession 

FedEx | Year Launched: 1971| Revenue as of 2019: $65.5 Billion

Fred Smith founder of FedEx developed the idea of quick and reliable door to door delivery and launched the business at the end of the 1969 – 1970 recession. Today, the business delivers over 6 million packages a day.

Microsoft | Year Launched: 1975 |Revenue as of 2019: $125.8 Billion

At the end of 1973, a major oil crisis along  with a stock market crash led to a year and a half long recession. This was the worst that the GDP has been hit in the last 5 decades. During this time, Bill Gates and Paul Allen launched their new computer business. Needless to say, they are doing a great job till date. This idea created almost 12000 millionaires.

Hyatt | Year Launched: 1957 | Revenue as of 2019: $5.0 Billion

A few months into the 1958 recession, Jay Pritzker purchased Hyatt. The travel and tourism sector was slow during this. This reduced the price of real estate and they invested in it. As times went by, the business picked and now Hyatt has about 900 properties with a revenue of $5 billion dollars. 

HP | Year Launched: 1939 | Revenue as of 2019: $58.8 Billion

The recession of 1937–1938 was the worst of all. GDP declined to 19% during this time. During this time, William Hewlett and David Packard decided to start an electronics company. Today HP is one of the most powerful giants.

Airbnb | Year Launched: 2007

The billion-dollar business idea was launched by  Joe Gebbia and Brian Chesky launched during the great recession in 2007. It was an idea to rent out a sleep mattress using an online platform. When the recession started, the need for low commitment living increased booming their business.

Companies that are starting out during COVID 2019 Pandemic

Meetaide

Meetaide is a scheduling and productivity tool that helps particularly sales and other client-facing roles to schedule and prepare for meetings better. Eventually helping users save time, stay productive and close deals faster.

Mailthis

Mailthis allows you to post forms and get responses without exposing your email address to the world.

We’ve had thousands visit the site since the Product Hunt launch two days ago (April 21, 2020), hundreds of people go through to the end of the process of mailing, and a few dozen actually pay. Looks like almost all of these people are testing it by sending something to themselves. … Seems to really have resonated with people. – Nick Freiling, CEO

Youprobablyneedahaircut.com

One of the biggest unsaid challenges that humans face during the pandemic is the getting a haircut. Youprobablyneedahaircut.com pairs you with famous hairstylists who will coach you to get your hair done. 

Bottom Line

The COVID-19 pandemic has been a big blow to the economy. Employees have gotten laid off and startups have gone out of business. 

But this means that there are several unaddressed market gaps, as well as new problems that have sprouted due to the new normal.

An entrepreneur is someone who sees an opportunity and ceases it. Look around yourself ⁠— you will see that there is a lot that is waiting for you.

It might seem scary to start up during a recession, but some enterprises that are successful now had started during tumultuous economic times.

Therefore, this is the right time to develop your idea into a product or a business. 

The best way to succeed faster is to utilize multiple resources, and a digital product agency is one of them. The faster you enter the market with a delightful product, the quicker you grow your user base.

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