Economic Downturn? Let The Startups Begin.
Amidst the plethora of news that we’ve been hearing from all industries about the economy heading towards worse times and as we hear stories of worsening conditions close to home (i.e. Nortel), I can’t help but say, let the startups begin.
There is a lot of talent in Ottawa and other cities around the world that currently work at larger corporations with comfortable, and in some cases, inflated salaries. It is exactly these conditions that make it almost impossible for them to attempt to either join a startup or begin one themselves. Times are changing and we may see more and more of this pool of talented and intelligent people move on to other things and potentially the startup scene.
We’ve seen this in the past and we have a number of local success stories coming from guys who voluntarily/involuntarily left their jobs at these large corporations and attained a level of success that they wouldn’t have achieved by staying at their previous positions. Companies like Nakina Systems, Nimcat, Fitel-Photomatrix, ObjecTime, and many many more fall under this category. Needless to say, the Economic Downturn can be looked at as an opportunity or a menace depending on how you look at it 
Olivier Dagenais on September 25th, 2008
I could have sworn Paul Graham ( http://www.paulgraham.com ) had written an essay about this very topic, but I can’t (for the life of me) find it! I also remember said essay mentioning Microsoft (among others) was started during a recession.
Anyway, searching for “recession startup” doesn’t yield much, but I did land on an article similar to this topic, from May 2008: http://www.inc.com/magazine/20080501/starting-up-in-a-down-economy.html
There does appear to be some precedent for that idea, so I’m 80% sure I didn’t imagine that essay.
Jay Godse on September 26th, 2008
If you run the numbers of who “made it big” at a startup, versus people who “didn’t make it big” at startups, you’ll find that working at a big corporation, on average, yields better earnings for the average person. For superstars….they’ll make it big anywhere, although many will enjoy it more working for their dream instead of the dream of some faceless executive in a remote location.
Also note that for every Nakina/Nimcat/Fitel/ObjecTime, there are at least a 5 like Sedona/Innovance/SS8/Icefyre/Accelight as well as a few companies that are cash-flow positive, but will never ever pay back their investors or founders.
Jay Godse on September 26th, 2008
Let me address one more point…
Just the way talented traders make money in bull markets or bear markets, there are lots of opportunities for software & hardware technology in booming markets as well as in busting markets.
Opportunities in booming markets are usually about expanding market share, growing top lines, introducing new services, etc. Think of the growth of Microsoft in the 1980s and 1990s during the computing booms as an example.
Opportunities in busting markets are usually about using using new techniques to improve business efficiency, providing basic services more cost-effectively. The last bust (for the tech sector) provided great growth opportunities for software folks that used open-source operating systems, databases, web servers, and scripting languages to implement software solutions without paying an arm and a leg for licenses of proprietary software. Think of the growth of the LAMP stack for web applications during the tech bust of 2001-2004.
This bust will build on those components, but will also add open source desktop operating systems (Ubuntu), embedded databases (SQLite), software tools (Eclipse), office suites (Open Office), Business Intelligence (Pentaho), CRM (SugarCRM), and a variety of very useful software tools. It will also create opportunities for companies that host and/or provide services for SaaS applications such as Google Docs, Salesforce.com, Success Factors, Basecamp, Dex (when it launches), because these tools provide a capital-free way (because they are subscription based) of using software to reduce the cost of doing business, and where the subcription costs are much more closely tied to the revenues they enable and the costs they save.
We are entering interesting times….once again .
Heri on September 29th, 2008
i say it’s an opportunity!
Natasha D'Souza on October 2nd, 2008
The past five years has seen the growth of open source, SaaS and web 2.0 services. In that time Ottawa has lost a large percentage of it’s talent to the class of “underemployed”.
More specifically if you have 25+ years of industry experience it’s hard to get past the hiring bias that exists in this city.
This has forced a lot of people to make a career change to the types of jobs they had as a teenager. E.g PhD in Engineering delivering pizza!!!!
It’s time to re-train these individuals on what web 2.0 is and what the social web really means.
This new found knowledge, their hardware background and industry experience will now start the innovation for the next generation of social web products.
Maybe that’s web 3.0
Olivier Dagenais on October 18th, 2008
It appears I have the ability to see into the future, because Paul Graham recently published an essay entitled “Why to Start a Startup in a Bad Economy”. Like Jay, Paul argues that there’s money to be made in providing money-saving products and services.
I, for one, will be selling access to my psychic abilities.
- Oli