More on starting a company in an economic downturn

Yesterday, The Industry Standard published an article that I wrote about why it’s a good idea to start a company in a recession. The article is here. (You should probably read it if you want to follow the rest of this post.)

Hacker News logoThis article generated quite a bit of buzz on Y Combinator’s Hacker News, so I wanted to take a minute to respond to some of the comments. Here’s the link to that chatter.

– The most common disagreement with the article seemed to be that many of the points that I was making about why it would be good to start a company in a recession also apply to starting a company in a boom. I agree completely. However, we unfortunately are not in a boom at the moment – we’re in (or entering into) a recession. The viewpoint of the article is “since we’re in a recession…” not “if you could pick between recession or boom…” I wholeheartedly agree that if you could set your ideal conditions in which to start a company, a boom would be the time.

– One commentor wrote: “start a company at a time and a place where there are no constraints and even the biggest idiot can be successful.” I disagree with the notion that there is ever a time that there are no constraints on a start-up. If there aren’t constraints, there should be. And this is the point I was trying to make. In a boom, start-ups don’t always SEE the constraints as readily or operate with restraint – but they should if they want to be using best business practices and give themselves the best chance of success. A recession forces those contraints on a start-up – but those constraints aren’t BAD. They help set good patterns and behaviors for running a business.

– In my opinion, it is not true that there is ever a time or place that “even the biggest idiot can be successful.” Successful idiots – especially in the world of start-ups – are rare.

Finally, various commentors suggested three other reasons that it’s a good idea to start a company during a recession and I wanted to include them here because I thought that they were worth mentioning:

1) “Your competitors will go bust.” -m0nty

Another commentor put it this way:

“Because the well-funded riff-raff drops out sooner.” -edw519

2) “Businesses that increase market efficiency in novel ways seem, to me, more likely to succeed during a recession. This is so obvious that I’m surprised the article didn’t mention it.” -mkn

3) “Also could get one more attention — maybe — because the media won’t necessarily expect anyone to be doing anything positive. Recessions are one big moan, and the ‘yipee!’ of a startup will stand in stark contrast.” -sabat

Thanks for all your commentary – keep it coming.

(Update: The discussion is continuing here:

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