A Look At 10 Successful Startups Founded During A Recession
From Airbnb to Groupon, let’s explore how these tech startups launched
With recent uncertain times across the world, 2020 is shaping up to be both exciting and frightening.
Many startups have experienced cutbacks, including many needing to initiate layoffs while others were closing shop. In general, though, VC deal activity has risen since the GFC.
As seen in the graph below, there was a small decline from 2008–2009 before picking back up into record highs in 2018 and 2019. So far, it looks like there will be a decline in VC deal activity in general by the end of 2020.
It’s essential, however, to remember that many startups were born from lows. Every recession eventually ends, and we saw many come out from the most recent Global Financial Crisis into successful startups.
In an even more exciting chart, 2009 was the largest number of US software companies that were founded between the Years 2003 to 2014, which was just at the end of the Global Financial Crisis.
This shows that many founders were hungry to begin, even if it meant starting in the middle of a recession.
For this list, in particular, the focus is to provide a broad view of a variety of companies under different industries.
Founded by Brian Chesky and Joe Gebbia as Airbed & Breakfast, Nathan Belcharcyk eventually joined as the third co-founder.
The idea was initially conceptualized during the Industrial Design Conference, where the founders initially focused on providing short term living quarters, breakfast, and business networking opportunities who were unable to find a hotel during the conference.
To sustain their business in the following early years during the GFC, the co-founders had to sell cereal boxes for Barack Obama and John McCain.
By 2009, they managed to get accepted into Y Combinator’s winter batch. Although Y Combinator co-founder Paul Graham wasn’t a fan of the idea, he was impressed by their bootstrapping techniques (around the cereal boxes).
This, of course, continued to drive the momentum after the GFC, is one of the most successful startups from the Y Combinator cohort. Although their growth was initially slow, the idea soon took over, with more people looking to make more income after the GFC by renting their own homes out.
Founded by Christopher J. Kelly and Ryan Simonetti in 2009, they saw an opportunity in the flexible workspace and conferencing business. A competitor to WeWork, Convene focuses on designing premium places to not only work but also to host events.
In a recent April webinar in 2020, Chris himself shared insights about why he founded his own business in a recession (see video below).
Not only do they provide spaces but also help handle all IT/AV issues for events. Convene has since raised over $260 million dollars and is headquartered in New York.
Uber IPOed last year in 2019 at a record of $75.5 billion, one of the largest in startup history. Although it has since dropped, it is still known as one of the biggest tech companies since launching in 2009.
Garrett Camp and Travis Kalanick originally founded the ride-hailing company (which has now branched into things like food delivery) as Ubercab. The idea itself came after they couldn’t find a taxi ride in a night in Paris.
Initially, it focused on offering luxury car rides, double the price for taxis. This focused on providing a niche for ‘executives’ that wanted a more comfortable and uninterrupted ride, especially for business trips. Launching first in San Francisco, it eventually went onto expanding into New York in 2011 May and then its first international expansion in Paris in December 2011.
Having just launched near the end of the recession, Uber came at a perfect time for those looking to earn money or create income for themselves, especially those who were laid off during the crisis.
Founded in 2001 by Ben Chestnut and Mark Armstrong, this email marketing service was launched in the middle of the dot.com crash. Mailchimp was originally only a side project during the crash and years ahead, netting the co-founders a few thousand dollars a month.
What is super interesting is not the initial dot-com crash (which they were working on it as a side project) but during the GFC when Mailchimp had to pivot from a paid service to a freemium model to help ride out the recession wave.
Within a year, Mailchimp rose from 85, 000 to 450, 000 users, solidifying their growth and also their continuous success till today.
Mailchimp has since never accepted any venture capital funding, having owned entirely by the two co-founders since its inception 19 years ago.
Founded in the middle of the GFC, Andrew Mason founded a company focused on providing a platform for businesses to offer deals on their products and services at discounted/special rates.
Focused around the old coupon style business model, Groupon focused on giving a techie makeover and focused on providing users ease of accessibility and a seemingly large amount of enticing deals.
Groupon focused on promising to offer cash-strapped consumers a way to spend less for their buck in a time where uncertainty was in the air. By the end of the GFC, Groupon came out on top of any of the other ‘coupon’ businesses.
“During a difficult time, Groupon was able to deliver performance-based marketing solutions to connect businesses and brands with their customers,” Stephen George, who was one of Groupon’s first five employees in 2008
By 2011, Groupon debuted its IPO, raising $700 million and setting the record as the second-biggest tech IPO at the time.
Tim Besse and Roberthohman were co-founded in 2007 when the idea came during a brainstorming session between them when Hohman told about a story where he accidentally left the results of an employee survey on a printer while working at Expedia.
They soon thought about what would have happened if the results went public, and they concluded that it would help future job seekers in their career searches.
Glassdoor’s website was officially launched in 2008 during the financial crisis. The website was focused on collecting company reviews and salaries from employees of large companies anonymously and then eventually moving into the job searching function.
Glassdoor eventually sold to Japanese HR giant Recruit Holdings for $1.2 billion dollars in 2018.
Another Y Combinator company, Square, was founded in 2009 by Jack Dorsey (founder of Twitter) and Jim McKelvey.
The idea originally formed when Jim McKelvey couldn’t complete a $2000 sale of glass faucets and fittings because he could not accept credit cards. Thus Square’s first product, ‘The Square Reader, ’ focused on accepting credit card payments by connecting to a mobile device’s audio jack.
They have since moved into other forms of technology such as Square Stands, Payroll (a tool for small business owners to process payroll for their employees), and other fintech tools.
Today, they stand at a valuation of around $40 Billion dollars, having IPOed in 2015 for only $2.9 billion dollars.
The story of Whatsapp demonstrates grit and tenacity from its co-founder Jan Koum.
Jan Koum found himself in the US in Mountain View, California as a young Ukrainian immigrant with his mother and grandmother. His father, who intended to come over, never made it and died in 1997. Unfortunately, his mother soon passed away after a long battle with cancer in 2000.
Jan came up with the idea in 2009 while being unemployed, after realizing the potential growth in the application industry since the App Store launched in 2008. He then worked with Acton to join the company after he bought in $250, 000 in seed funding.
As we all know, the company has since grown tremendously and been acquired by Facebook for a whopping $19 billion dollars in 2014.
The story around Whatsapp is one of my favorites and continues to show why tenacity and grit is one of the most important traits in founders, especially during downturns.
Founded by David O.Sacks in 2008, Yammer is a freemium enterprise social lent working service used internally for businesses (or the intranet). It has since been acquired by Microsoft for $1.2 billion and been included in all enterprise plans of Office 365
Originally part of an internal communication system for Geni.com, it was soon spun off into its product. The product ultimately won the major prize at TechCrunch50, which helped raise enough money to kickstart Yammer and drive its growth.
By the end of 2008, we were in the middle of the financial crisis, and raising money was really hard. — This Week in Startups Podcast
David has mentioned himself that without TechCrunch50, raising money might have been a struggle without the exposure at TechCrunch. He suggests that founders during a recession should take whatever money while you can during uncertain times.
Cloudera is a software company that focuses on a platform that provides software and services related to Apache Hadoop. In simple terms, it helps provide a platform with data warehousing, machine learning, and analytics, all focused around the cloud or on-premise infrastructure.
Founded in 2008 by Christophe Bisciglia, Amr Awadallah, and Jeff Hammerbacher, Cloudera has since grown to $3.66 Billion since its IPO in 2017.
The focus on this list was to provide insights on startups that made it big since the financial crisis in 08–09 (as well as Mailchimp’s inception during the dot-com bubble).
Many of these startups came from different industries, with founders from a variety of backgrounds.
This shows that startups can grow to incredible heights, even during uncertain times.
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