Is downturn a good time to start a new venture?

Techcrunch recently posted VC funding figures for the third quarter that show VC funding for Internet startups is down 16percent since same time last year, while overall funding for startups is down by 7percent.

With all signs pointing to the world going to hell in a handbasket, starting your own business during the worst economic crisis could be considered a sign of sheer lunacy or…maybe not.

Paul Graham has an excellent essay on starting startups in the downturn, he says that the economy by itself shouldn’t dictate whether or not you should start your own gig.

If we’ve learned one thing from funding so many startups, it’s that they succeed or fail based on the qualities of the founders. The economy has some effect, certainly, but as a predictor of success it’s rounding error compared to the founders.Which means that what matters is who you are, not when you do it.
If you’re the right sort of person, you’ll win even in a bad economy. And if you’re not, a good economy won’t save you. Someone who thinks “I better not start a startup now, because the economy is so bad” is making the same mistake as the people who thought during the Bubble “all I have to do is start a startup, and I’ll be rich.”
While the going is good, even the most mediocre ventures will get funded but only the good ones can survive the downturn. If you have what it takes to build a business during the downturn, you’ll be in great shape to ride the wave during the good times as well.
Here are three reasons why current economic downturn is a great time to start your own venture:
1) Easier to find qualified people: Many companies are laying off talented people and their loss might just be your gain. It is easier to find qualified people during a downturn and when the stock market is down, rather than in a booming economy where you can’t even begin to compete with high-flying stock options.
2) Less competition is a good thing: The economic crunch has forced flight to quality for VC Funding. Now that the VCs are not throwing money with anything that has half a business plan, you may find that you have less competition. You also have more time on your side especially, if you’re planning to bootstrap your venture and scale slowly.

3) Diversify your risk: With the prospect of mass layoffs looming large, it’s a good time to re-evaluate your options and diversify your risk. The layoffs combined with hiring freezes has increased the scarcity of interesting jobs. If you’re looking for job satisfaction vs. just a paycheck, what could be more fulfilling than your own venture?

Now, it is your turn to tell us what you think.Vote below to let us know if right now is good time to start a new venture and as always, leave your comments in the comments section.


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