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Market Downturns are a Great Time to Build a Startup, or are they?

Inc | Steven I. Weiss | Jul 29, 2022

building ventures in a market downturn - Market Downturns are a Great Time to Build a Startup, or are they?Is now an especially good time to start a business, or be an early-stage company? That's the thesis of VC Zach Weinberg's tweet that went viral in startup-land, in which he asserted: "Sounds crazy but [now is the] best time to be an early stage founder."

But is it true? That depends a lot on your situation.

Timing is Key

Arguably the most popular claim about startup timing comes from founder and investor Bill Gross, in a TED Talk he delivered back in 2015. After studying 200 companies, he concluded that timing is, in fact, the most important factor contributing to their success or failure. If you can just time your company or product correctly, the implication is that you can make sure you're on the right side of that divide.  It's about whether now is the perfect time to get your potential customers to want to adopt your product.

Building during market downturns are better for startups

For companies that need to pivot due to economic shocks, there is reason to believe that the economic conditions benefit newer companies more than than established ones. They're more flexible, able to recognize opportunities, and adjust their teams' focus to respond to stress.

A key insight: "Existing evidence suggests that firms created during major shocks tend to perform better over the long run."

Hiring is Better

When it comes to hiring -- a major challenge for startup founders -- downturns can be a better time for getting talent on board, if a company has sufficient access to capital for that hiring.

See:  Governments, Don’t Let your Startups and Scaleups Die

Today, many large companies are freezing hiring or even cutting their teams; if you're in a hiring phase, you'll have access to better talent for less than even just a few months ago.

M&A and Partnerships

This economic climate can also be a great time to acquire a company. Valuations are down for many businesses from a few months ago, so if one of your best paths to growth is through acquisition (something that many Inc. 5000 companies tell me has been essential in their path to four-figure growth), now could be a good time to start having those conversations with competitors or companies offering adjacent products or services that would be a good match for your current offerings.

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NCFA Jan 2018 resize - Market Downturns are a Great Time to Build a Startup, or are they?The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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