It sure looks like it, given the financial news worldwide. Stocks falling, credit freezing, centuries-old bastions of industry faltering. It's not pretty, and no one knows what's going to happen next. So what does it mean for entrepreneurs who're just starting out?
In the high tech world, when top venture capitalists speak, Silicon Valley, and as we (possibly hubristically) believe, the world, listens. They have been well covered in other blogs; TechCrunch has Sequoia's 'doom' outlook, Benchmark's call to frugality and angel investor Ron Conway's cautionary memo - all very interesting and must-read. Most of the focus is on companies that are already funded, not early stage ones that are hoping to get there, but the message is pretty similar for both: don't expect funding. The prevailing mood is dour and the call-to-action is 'hunker-down'. Nothing unusual though - VCs are typically conservative, though they're ostensibly in the business of taking risks - nobody gets fired for preaching thriftness (with impending doom).
But I'm not alone in thinking that entrepreneurs do have an opportunity in this climate and a startup is not a bad place to be in. While the VCs are talking mostly about funded companies, the warning on scarcity of funding is probably even more true for the fledgling startup. Even if you aren't doing a startup which requires funding, you still have to face an environment where customers are not quick to buy anything. so, if you have mortgages to pay off and mouths to feed, I wouldn't recommend quitting to start something. But if you're unencumbered and/or find yourself out of a job, or if you have some spare time for moonlighting, and have an idea that's you're burning to try out, now may be a good time to do so.
Successfully launching a startup in these times comes down to four things. The first is your idea. Is it something that can be done with little money? When do you have to go to market? If it is in the near future, it had better smell 'recession-proof' and that's no mean feat. There are many who think that means saving a few bucks for their customer, but a lower price is meaningless if it is something your customer can do without. What you offer should be obviously of value to your customer/user today, without needing a sales spin or convincing, and should be competitively priced. Then you'll have a chance of gaining traction in the market.
The second is execution. Your awesome value-delivering idea is just that, an idea, not a successful company, if you can't execute on it. And in lean times, execution is about getting stuff done with little money. Which means thinking frugally at every step and finding alternatives. You have to make tough choices and may find your timeline slipping because you don't have the resources, but that is better than slipping on quality. But 'getting stuff done' also means staying focused and not letting your vision slide along with stock prices on Wall Street.
The third item is your team. Even if you only have a couple of people moonlighting on your venture, you'll see upward momentum if they have a 'can-do' spirit and feel ownership in the success of the company. And it is always more uplifting to be with pragmatic, but positive, people than those who gripe and groan - when times are bleak, you don't want your team to be ditto.
The fourth is what kind of an entrepreneur you are. If you're focused, flexible, determined and unafraid to work with little money while diligent about seeking more, you have a much better chance of survival. If you tire quickly of lean budgets and making-do, this is not the time for your startup. The bar is higher during tough times, but not impossible to clear, and if you can do that, you'll still be standing when the sky is raised again.