How will the current market crisis affect Startups?
I was just wondering what startup investors out there think about if/how the current market crisis will affect new startups' funding. I think this is especially relevant now, considering that YCombinator submissions will deadline in a week. Anyone?
7 comments
It should focus minds on business models, that's for sure. There's nothing wrong with bootstrapping or having a point to doing what you're doing (ie, making profits). Do you REALLY need the funding?
I think the smaller investors will want to be sure about the team running these startups. And disruptive tech, however cool, isn't going to cut it. Jam today will beat ham tomorrow.
VCs invest in 10 companies and expect 8 or 9 failures, and 1 big winner. In that sense nothing will change.
Also, a recession is a sure-fire opportunity to launch a company, no doubt about it. Better deals and other companies cut the chaff. If you can help another firm improve efficiency, or optimise what they're doing, then you will be well placed.
I think the smaller investors will want to be sure about the team running these startups. And disruptive tech, however cool, isn't going to cut it. Jam today will beat ham tomorrow.
VCs invest in 10 companies and expect 8 or 9 failures, and 1 big winner. In that sense nothing will change.
Also, a recession is a sure-fire opportunity to launch a company, no doubt about it. Better deals and other companies cut the chaff. If you can help another firm improve efficiency, or optimise what they're doing, then you will be well placed.
That's a great point, regarding improvements on already existing services/companies; they will welcome any ways to decrease their costs or increase their revenues. But do you think that a recession is also good for starting a company with a brand new product/service?
It depends on the market you're aiming at. Some market sectors are recession-proof, others less so. Holidays in Hawaii / Bali might be downgraded, but people will still want to go on holiday.
Also, it is competitive out there, but if you are in a niche then go for it. If you have a lot of competition then do it better.
I personally believe that the companies of the future that will do best will listen and learn from their customers. They'll engage with customers. They will let their customers tell them what they want.
We already know what works on the internet in terms of usability / user experience / product page design / checkout process, etc, so don't go reinventing the wheel. Many large companies still suck at this stuff (just look at the Gap.com website if you don't believe me).
Be the best. Understand the mindset of your customers. Make sense of your data. Iterate as often as is practical. And market the shit out of your product (don't forget to sell it to Google via a blog...).
What area are you boxing in?
Also, it is competitive out there, but if you are in a niche then go for it. If you have a lot of competition then do it better.
I personally believe that the companies of the future that will do best will listen and learn from their customers. They'll engage with customers. They will let their customers tell them what they want.
We already know what works on the internet in terms of usability / user experience / product page design / checkout process, etc, so don't go reinventing the wheel. Many large companies still suck at this stuff (just look at the Gap.com website if you don't believe me).
Be the best. Understand the mindset of your customers. Make sense of your data. Iterate as often as is practical. And market the shit out of your product (don't forget to sell it to Google via a blog...).
What area are you boxing in?
Thanks for the insight, I appreciate it. I'm currently aiming at some rarely explored user base in the social networking area. Can't disclose details, but it entails the sharing of life events.
The recession will have a cleansing effect on the startup landscape. All the "me too" companies that got funded by dumb money chasing the next Facebook will fail. Startups that don't provide value and generate revenue will fail. It will be much harder to get funding, but its the perfect time to bootstrap a company that can help businesses cut costs or consumers save money.
Just an update, on an interesting article that talks exactly about how "savings" applications are the most successful in times of recession: http://embought.com/blog/show/17?t=Apps-to-Build-in-a-Bad-Ec...
Capital scarcity gives a huge advantage to those with the means to fund their own venture. You'll be able to start a business without being attacked by 20 funded "me too" outfits. The flip side is that if you don't have a war chest of savings or funding now, you're the loser.