Is a recession a good time to start a new business?

With technology suppression making headlines, 2023 may not be the year it’s going to be easy to find a decent tech job. Although this will undoubtedly be a time of crisis, it is also a time of opportunity. Here are the top risks and opportunities for new startups during a market downturn:

1. Capital:

Access to capital is often a problem during market downturns. Most startup funds tend to be more conservative and generally invest in new projects. Even worse in early-stage startups – investors’ risk tolerance may drop, meaning that capital for new projects will naturally focus on a few “safe” bets.

This is a typical government policy during a recession to increase spending to fight the recession. This means that business loans can be easily accessible along with other forms of fiscal stimulus (subsidies, etc.).

2. Expenses:

While capital may be a little harder to come by, you may need less of it to survive. During a recession, the cost of hiring employees, renting office space, and other operating expenses may be lower because supply increases and demand decreases. This allows a startup to stretch its funds further and become profitable faster.

3. Talent:

By far the biggest reason a recession is a good time to start a new project is the availability of great technology.

During an economic boom, competing with established tech giants for top talent is tougher because of the pay scale and other benefits that established corporations can offer. However, due to layoffs, attracting and retaining high-quality people suddenly becomes easier.

However, when costs are reduced and reduced in the giants, experienced people are suddenly on the market. This means not only can you find and hire people easily – you can probably find very high quality co-founders.

It’s not uncommon for former colleagues to become partners and start projects related to the industry they previously worked in. It’s not uncommon for layoffs to occur. During boom times, large businesses tend to grow more efficiently.

This leads us to our final point:

4. Markets:

Favorable market conditions during economic booms and inefficiencies in the supply of capital make it fatal for large corporations. A recession, however, would put an immediate end to this. Consumers become more cost-conscious and quickly reduce their spending on what they consider unnecessary products and services. Coupled with the fact that capital is becoming increasingly difficult to access, this can quickly lead to inefficient and inefficient businesses going bankrupt.

This is both a risk and an opportunity for young startups. The efficiency of such projects gives them the opportunity to take innovation and business models – in other words, to apply the lessons we mentioned. Moreover, the failure of old businesses opens up a space in the market for new companies that can provide better products and services.

However, the price awareness and conservatism of consumers makes it difficult for established brands to attract new customers, which means that the new shiny thing is not enough to be successful. You have to offer something of real value that people are actively looking for.

In conclusion, there are pros and cons to starting a business during a recession. All things considered, the higher your chances of attracting high-quality tech talent to your project, the better it is to try something new.