I met with a guy last night who started his business in the late nineties, built it up, got slapped in 2001 by the market, held on, kept building it up, got some success, and sold it a year ago and is about to lose his golden handcuffs.

We were talking about the market and fear flying around and it struck me that it’s the perfect time to start a new business. Here’s why.

It Takes Time

The first reason is that it takes time to start something from scratch, build it up and make serious profits/sell it. Forget the very, very rare cases of YouTube that were up and flipped in 18 months. Most companies take a year or two to establish, a year or two to build up and a year or two to sell. That’s six years. Check out my 100% accurate graph below.

You’ll see clearly that we’re in a slump but it’s 99% likely to go back up bigger than it was before, so it’s not all doom and gloom forever. But it won’t stay up forever. Maybe in another eight to ten years we’ll have another slump. Cycles, trends, blah, blah, blah.

So if you start now, you’ve got the most time between this slump and the next one to get going, grow and get it done.

You Don’t Need A Boom To Start

It may be true that it’s easier to start in a boom, but it’s not required. You’d much rather be growing or selling/profiting in a boom because that’s when you want to accelerate. But establishment is different. Establishment is setting up a base. A base isn’t about millions of dollars or millions of users. It’s more in your ball court.

We’re also in web technologies (or at least we are). We’re not pharmaceuticals, manufacturing or mining that need millions just to get started. We can, and definitely should, be lean and cheap until we’ve got a solid core utility.

In fact, if this slump forces more startups to brutally focus their big visions to something they can start with $5,000 and/or between 9 to 5 (pm to am that is), then I’ll be very, very happy. I might have a little less work to do tightening up products, but then I’d have more enjoyable work launching products that get traction.

Great People For Hire

In boom times it’s hard to find great people because there is more silly money to pay massive salaries and give lots of perks. But right now, it’s much easier to hook up with a few rockstars. This is a mucho mucho important point. The team is about 814 times more important than the idea. It’s the team with the brilliance, passion, culture, connections, dedication and experience that take it through the tough times and make them good times.

I’m not trying to treat people as a commodity here, it’s just the facts that supply will outstrip demand for a while and that’s a good thing for founders.

Slump In What?

The stock market has dropped, real estate sucks, and there will be a trickling down, flowing on effect, but this just means a drop in growth, not a significant drop in spending. Consumers will still be buying food, services, entertainment and toys. Businesses will still be buying productivity, organisation, advertising and advantage. Maybe less, but not zero. You can still sell stuff.

I repeat “You can still sell stuff”

So focus on creating enough value that people will pay for it. Here’s a question I ask a lot of founders who have an advertising or ‘freemium’ model – “If you asked your current beta testers if they’d pay $50 a year for your product or they’d lose it, how many would you keep.” If the answer is zero it means that not one of them thinks that it adds $100 worth of value to their lives. This generally means your product is a nice to have but not significantly worth it. If some people won’t pay $50 then most people won’t pay the time it takes to register, come back, and keep using you.

Remember the value equation;

Net Value = Total value minus (direct dollars plus indirect plus non-dollar costs)

$100 = $200 minus ($50 fee + $10 net access + $40 time invested)

That’s contrite and pretty much pointless other than the principle. And it normally works a lot more like;

“Nah, it’s not worth it” – made in the blink of an eye and the click of a mouse.

Sell stuff.

There Is Money

As mentioned above, you really don’t need much, but if you do and you’ve earned it, it’s there. I know of at least five angel investors who are prepared to invest as little as $20k and as much as $500k to support a great team with good momentum. Matthew McFarlane and the team have secured $20m private and matching from the govt for Yuuwa Capital. Venture Capitalists (some) still have funds they must invest. There seriously is money.

Yes, there’s less silly money, less private equity, less from family, friends and fools, but it’s there. Maybe it will take longer, maybe you’ll have to work harder, maybe you’ll get a bit less – but it’s there.

We’re All Still Here

No start-up is an island. It is born, nurtured, matured and blossomed in a community and network that is a key part of the success. The Bay Area is big enough to keep charging through this. Ireland, Israel, Tallinn, Toulouse, Auckland, Barcelona, Shanghai – all these tech hubs are determined enough to make it through a lull.

Pollenizer is a global company, but we’re based in Sydney and we’ve been trying really hard to help build up the community here. Is it strong enough to get through the lull? Only time will tell, but I think yes, absolutely. Why? Because we’ve got some good businesses that are strong enough to survive. Because we’ve got some people who’ve been through 2001 (and even 1987) and are wiser for it. It’s also a bit self-fulfilling, and the people I hope are going to step up are grinning, irrepressible optimists, so it will take more than a stumble to stop them. I love it.

So Get Started

Someone’s going to start a business tomorrow that will be a wonderful success in five years. Do they have more time in the day? Do they really have that many better contacts on LinkedIn? Is it going to be just because they have more cash in their bank right now? I don’t think so.

So if you’ve got an idea that’s been in your head and you’re thinking “Woah, have to put that on hold for now.” then pick it back up again. If you’re not sure where to start, then email us (info pollenizer) and we’ll work it out.

It’s a great time to start a new startup.

ADDITION: Less Competition In Innovation

When the economy flies to safety, one of the first budgets of the big boys that get cut is the R&D budget. For them, throwing a lazy 5 mill at an idea when the cash is flowing is easy, but when the ‘oh shit’ hits the fan it’s not going to be approved and it’s probably going to get canned even if it’s 90% through.

Why is this good? It means that they are leaving much of the new opportunities to you and your shiny new startup. They are sticking to their knitting while you’re out their creating the future. It’s not that they don’t care about that any more, it’s just that they aren’t prepared to take the risk. And it certainly doesn’t mean that they won’t invest or buy you out when you prove your mettle, they would be delighted to because they get the upside, without the risk. You get the reward for taking the risk, and proving you can execute.