Many of the best tech companies were starting during recessions — Airbnb, Uber, Square, and Slack were all started during the Great Recession of 2008-2009. Venture capitalists commit to backing companies over a long term time horizon, so we’ll continue to invest in the most promising startups no matter what the macroeconomic climate. In fact, several of Greylock’s investments were made during recessions — we invested in Pandora and Redfin during the Great Recession and both companies eventually went public.
The industry and societal forces driving technological innovation don’t stop during a recession. This can be a great time to build a startup because the competition for resources goes down. It can be easier to hire talent, find office space, and acquire customers through online advertising as the ad auction prices decline. And you’ll likely have fewer venture funded competitors to compete with, so it’s easier to stand out with potential customers and users.
During a recession, startups should be focused on their core products and business, and should manage their cash burn carefully. Avoid expensive bets on adjacent businesses or product opportunities unless your core is rock solid. Also be aware that the primary motivations of both consumer and enterprise buyers change during challenging times: they start looking for products that will save them time, money, and expenses.
Enterprise IT budgets often get cut during a recession, and consumer spending tightens. You may want to change the positioning/marketing of your product to speak to these needs. This is one of the reasons that Groupon was so successful when it was founded during the Great Recession as it appealed to consumers who were looking for value from products and services.
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