Benefits of a Downturn for Strong Startups

Famous entrepreneur and venture capitalist Marc Andreessen just put out a tweetstorm telling people to worry that many startups are spending excessively. While the overall landscape is nothing like the dot-com hey day, there are a number of signs that things have over heated. If funding dries up and a number of startups shut down, startups that have meaningful growth metrics or are profitable do see several benefits:

  • Talented people hit the market (right now, there’s a shortage of experienced sales people and software engineers)
  • Recruiting becomes less competitive (until the next hot area emerges)
  • Investors will make fewer investments and flock to higher quality startups (though valuations will be lower)
  • Subleases for cool office space become readily available
  • Noise in the marketplace from competitors dies down (assuming a number go out of business)

Downturns are never pleasant but strong startups will benefit from a correction. Of course, this only affects markets that have had access to large amounts of risk capital, and there aren’t too many of those.

What else? What are some other benefits during a downturn for strong startups?

One thought on “Benefits of a Downturn for Strong Startups

  1. Make the tough decisions. Get your startup to break even fast and prepare for the worst or cease to exist. I navigated the first dot com bubble. Lay off deep so you don’t need to have multiple layoffs and refocus the business on your strengths and abandon non critical business lines to focus on your strengths. Don’t think you are immune to the economic shifts. It is easy when things are going well but it is the businesses that best deal with adversity that end up being the strongest businesses long term!

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