2008 was a huge outlier though. This was the start of the hugely lucrative cloud, app-payment, SAS, smartphone, 4g, app-store, social networking, mobile confluence. Also, low interest rates forever. A typical bad economy is not like 2008. But sound advice
Some people seem to be overthinking this by a long shot. If you have a company you want to build, then it's always the right time to start. The greater economy will always have influence both positive and negative. But considering this, it's probably better to start in a "bad economy" than a "good economy" assuming it's a strong business idea that you can keep alive and grow until the economy becomes "good" again, and then you can exit into the good environment rather than starting when things are rosy and wanting/needing to exit when things inevitably turn south again.
> <i>For years I've been telling founders that the surest route to success is to be the cockroaches of the corporate world.</i><p>This has always seemed incompatible with the VC model, which involves raising a ton of money, putting the company on an 18 month clock, spending the money so you can hit key milestones, and then raising even more money when the clock runs out.<p>I have heard of a few companies that were on the VC track, raised money, and stayed frugal. But my impression is that investors want to see you swing for the fences, which involves spending all the money they invested, and fast.<p>How common is it for startups to buck this trend?
I'm of the opinion that the right time is always now.
However, when things are great, large wealthy companies over-hire and over-pay everyone. It sedates good employees to stay and be comfortable.<p>When things hit the fan, the larger and fatter a company is, the more likely they will throw the baby out with the bathwater. They go into ultra-stupid cost-cutting mode and that is a great opportunity to hire some of the best dormant employees you'll ever meet.<p>Since the best determinant of a company's success is the makeup of the team, I'd say when the economy is bad is the best time to start a company. You'll land some of the best talent and that'll give you the best chances of success.
Well the biggest difference is that the economy was "bad" then but central governments/banks were accommodating.<p>It's "bad" now because central banks are actively making capital more expensive, which makes it harder to raise money for a speculative bet.
I would say whether PG is right or not depends on how much initial funding the founders have and what they're trying to build.<p>If you have not a lot of savings to live from, and your runway is therefore short, you'd be stupid to quid your day job and launch your startup: your small savings will quickly be used up and that'll be the end, because you won't be able to raise a round.<p>If, however, you have substantial savings to deploy so that you can get far enough to afford to pivot 1-2 times until you find product-market fit, then PG is right and taking the plunge is the right thing, regardless of business environment.<p>If your plan relies on customers, then it also depends on whether your product or service is aimed at reducing customer cost or has value in a different way.<p>To exemplify the above: I claim "You can/should start something like AirBnb in a bad economy, but not Google."
It's an open secret that investors get 20% of the upside for 1% of the work of founders. Parrot enough plausible nonsense to impressionable people to get favorable investment terms and you're well on your way to monetizing your position as a newly minted thought leader.<p>Nice work, if you can stomach it.
VC has unfortunately pushed forward a model that rarely helped building sustainable businesses, but rather grow fast, build hype, IPO, cash out move on
model. It definitely benefitted few at the expense of many.<p>People have accepted to work tireless hours for peanuts and paper money
with the promise they will become rich: this rarely happen. Don't buy the
hype. It is more the exception than the rule.<p>Many multi billion dollar VC funded business are still not profitable
and often don't have a path to profitability.
Not really sure how this advice is still relevant since Facebook with its own app store model helped save the tech industry in 2007 from the downturn like the one in 2001-3.<p>The next big thing appears to be AI (not VR), but I don't really see how it can really compete with that historic low cost startup. What would a MVP AI even look like? Would it only be a good AI part of the time? We already have that. Try using Siri.<p>> That was the task for some Stanford students in the fall of 2007, in what became known here as the “Facebook Class.”<p>> The students ended up getting millions of users for free apps that they designed to run on Facebook. And, as advertising rolled in, some of those students started making far more money than their professors.<p>> “Everything was happening so fast,” recalls Joachim De Lombaert, now 23. His team’s app netted $3,000 a day and morphed into a company that later sold for a six-figure sum.<p>> Early on, the Facebook Class became a microcosm of Silicon Valley. Working in teams of three, the 75 students created apps that collectively had 16 million users in just 10 weeks.<p><a href="https://www.nytimes.com/2011/05/08/technology/08class.html" rel="nofollow">https://www.nytimes.com/2011/05/08/technology/08class.html</a>
Is the economy really bad now? US unemployment rate is lowest it has been since 1970, where I live the restaurants are full, roads are full of cars, planes are full of people, hotels are booked for events well in advance. What exactly is bad besides people having less throwaway cash because eggs and bread is more expensive? Tech layoffs are, IMHO, more an excuse to cull bloated orgs without getting negative press because everyone is doing it, not because of necessity. We're past the Ukraine/Russia war shock and resource shortage scares, what else?
We're not in the same market as this article. Typically, in a bad economy salary expectations are lower making a startup launch more "affordable." Unfortunately, that is not the case currently with ongoing inflation. Salary expectations continue to increase on average, not decrease.
<i>Are</i> we in a bad economy? Bitcoin market cap is 400bln. OpenAI eyes 30bln valuation etc. etc.<p>Business cycles, timing the downturn and all that, does this Warren Buffet type "sound contrarian advice" apply also in Alice in Wonderland economies?
A good companion article to read in tandem (also by Paul Graham):
<a href="http://www.paulgraham.com/notnot.html" rel="nofollow">http://www.paulgraham.com/notnot.html</a>
"But it doesn't matter much either way. It's the people that matter. And for a given set of people working on a given technology, the time to act is always now."<p>So agree with this sentiment. It matters less about when you start a company. It's how you execute. You might be building something very timely, but if you can't scale then it hardly matters whether there's a recession or not.
Please remember that PG is a financially very secure person, who is in the business of getting people on board with YC and committing to throw themselves 100% into tech companies that will individually more than likely fail.<p>If PG says "you should start a startup in a bad economy" it's simply a clever sales pitch, a spin on the current circumstances. Back in 2008 when this was posted it was presumably in response to the Global Financial Crisis (or "Credit Crunch" in the UK), I'm guessing it's being posted again due to the recent layoffs.<p>It <i>may</i> be the right time for you to take the plunge, but you should be reading this article with a clear head and remember that this is not an old friend giving you some sage advice, but someone who is incentivised to get you to take risks on their behalf.
The single best reason I'd give, for why it's a good time to start a startup in a downturn, is that it's all signal. There's little or no noise. No noise from buyers who are just tyre kickers, or who buy a little but dont truly adopt, even from VCs who might at other times waste a lot of your time.
Taking this with a pinch of salt given the nature of our current situation vs. 2008.<p>> Technology progresses more or less independently of the stock market.<p>Progress could be defined in many ways, but sure as hell there is less money in the tech sector, and funding is very difficult right now as far as I understand.<p>I do agree with the sentiment that the market shouldn't affect your timing if it can be avoided, but I wouldn't expect it to be very easy to start something capital intensive with a long road to profit right now...
I launched my startup May 1st 2021. And yes COVID was still very much in play.<p>My thinking was if I can survive in the lean times, I can survive in the better times.
The runway from nothing to something is about ten years on average. If you start when times are hot, you’re closer to the next reset event and more likely to experience the reset before you exit. If you start when things are dead, you have the most time to figure things out and exit when things are hopefully not dead yet.
From Paul's perspective in 2008, this makes sense. And generally, this is sound advice.<p>However, in the 2010s, we saw an explosion in tech business opportunities and cheap capital during strong economic times. Most of today's unicorns are from this era.