Why to Start a Startup in a Bad Economy

The economic situation is apparently so grim that some experts fear we may be in for a stretch as bad as the mid seventies.

When Microsoft and Apple were founded.

As those examples suggest, a recession may not be such a bad time to start a startup. I’m not claiming it’s a particularly good time either. The truth is more boring: the state of the economy doesn’t matter much either way.

If we’ve learned one thing from funding so many startups, it’s that they succeed or fail based on the qualities of the founders. The economy has some effect, certainly, but as a predictor of success it’s rounding error compared to the founders.

Which means that what matters is who you are, not when you do it. If you’re the right sort of person, you’ll win even in a bad economy. And if you’re not, a good economy won’t save you. Someone who thinks “I better not start a startup now, because the economy is so bad” is making the same mistake as the people who thought during the Bubble “all I have to do is start a startup, and I’ll be rich.”

So if you want to improve your chances, you should think far more about who you can recruit as a cofounder than the state of the economy. And if you’re worried about threats to the survival of your company, don’t look for them in the news. Look in the mirror.

But for any given team of founders, would it not pay to wait till the economy is better before taking the leap? If you’re starting a restaurant, maybe, but not if you’re working on technology. Technology progresses more or less independently of the stock market. So for any given idea, the payoff for acting fast in a bad economy will be higher than for waiting. Microsoft’s first product was a Basic interpreter for the Altair. That was exactly what the world needed in 1975, but if Gates and Allen had decided to wait a few years, it would have been too late.

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(from: paulgraham.com)

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