Downturns are a great time to ‘start-up’…

I’ve lived through two major tech downturns. I arrived in the Valley in ’99, just before the bottom fell out in March ’00. We then had to survive the nuclear winter in 2008. While the current downturn is more of a valuation downturn, funding at all levels is significantly lower than it was in the last few years.

While its a tough time to be ‘above the cone’ — or to have raised money at valuations above the level company progress would merit, I think the next year to two years are a GREAT time to actually start a company.

Several awesome companies were founded during downturns — Google, Paypal and VMWare during the ’00 timeframe; and many of the current crop of unicorns during the ’08 period.

Why?

It’s not fashionable. That Google or Facebook job looks warm and cozy right now. Hence only people who are serious with a burning idea end up doing it.

Its less noisy. Fewer people and fewer startups competing for attention. Although investors with large portfolios are pretty distracted with tending to them, there are plenty of investors who’ve slowed down in the last two years and are looking for exciting new projects. (I’m one of them!).

There’s more signal in a successful raise. While investors contribute capital, founders contribute time and sweat. In the ‘90’s, raising from a good investor was a strong signal — one that helped determine if its worth the founders spending an all consuming 5–10 years. Better to make sure its worth the brutal effort. If you get funded now, you can be more confident than in the recent past.

It’s more honest. Lets face it, startups face crushing odds of success. In good times, there’s an expectation that the rising market will lift all boats, which leads to having to always portray that you’re ‘crushing it’. In tough times, making actual progress is cause for celebration, there is less pressure to show a happy face to the rest of the world.

But most importantly: Founding a company is not a career decision. Its an obsession. Its about ideas that you cannot stop thinking about. And obsessive people with compelling ideas don’t let the financing markets stop them.

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