My advice for tech entrepreneurs thinking of launching right now? Don’face to face wait. A recession can be your ally in building a incline for support, thriving association

By Vivek Wadhwa

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In in good time October, Sequoia Capital summoned executives at its portfolio companies for an imperative meeting to discuss survival in the economic downturn. The presentation at the meeting, titled "R.I.P: Good Times," quickly made its way onto the Internet, adding to fear in the startup common in Silicon Valley and over. Sequoia, rear wholly, is one of the most respected luck capital firms in the country, an in good time backer of Google (GOOG) and several other huge technology successes. One takeaway from Sequoia’session presentation was clear: With the economy souring, since is a bad time to launch a tempt fortune or to expand an existing business.

Or is it? The founders of Johnson & Johnson (JNJ), Caterpillar (CAT), McDonald’s (MCD), and Walt Disney (DIS) might not agree. All of those companies were founded during an economic downturn. So were Adobe (ADBE), Intel (INTU), and Compaq (HP). Bill Gates didn’t let a recessionary environment stop him from launching Microsoft (MSFT). Chuck Schwab founded his abatement brokerage during the recession of 1974. And in 1982, U.S. unemployment was soaring to the highest levels in decades; that didn’t intermit Scott McNeely and Vinod Khosla from launching Sun Microsystems (JAVA). In actuality, 18 of the 30 current Dow Jones industrial index companies were launched during economic downturns, according to research by Reference Capital Management, a venture capital fund based in Tigard, Ore.

I, myself, have been through the startup process twice, in both economic ups and downs. My principal company, Seer Technologies, was conceived at New York investment margin Credit Suisse First Boston (CS) after the market crash of 1987. The bank soon needed to deprive key technologies. Despite the gloomy economic market, by 1989 we had raised the excellent needed. And with almost no competition in sight, we grew the startup to a public meeting of friends by $120 million in revenue in 1995.

I started working on my second startup, Relativity Technologies, in late 1996, before the dot-com boom. We built the products, understood our markets, and recruited a wealthy executive team. The result? By 1998, we had venture capitalists tripping completely reaped ground other to give us money, and I was able to raise about $10 the multitude over two years to open a lucky startup.

My information for other tech entrepreneurs thinking of launching right now? Don’t wait. A recession is your ally in edifice a lean, thriving company. Consider the following four advantages.

Less rivalship. An economic downturn clears the competing landscape for startups. Most of the "me-too" companies by inferior products and exposed business models avail out of business, and fewer are started. Plus, it becomes a lot easier to vouchsafe licensing deals with universities and business partners—no one else is.

Lower costs. It is a buyer’s market, and you can negotiate deals on real estate, equipment, and materials find to one’s mind never before. Salaries are decrease for new hires, and in that place is little pressure to give big salary increases to existing staff.

Easier to recruit and keep employees. You power of determination readily find people who have been laid off and are sanguine to get back to work. They will accept sink salaries in return for reposit and take the risk of joining a startup. And rather than focusing in succession getting a job with a competitor who pays a tiny more money, employees are usually content to build tenure and focus on your success.

Less pressure to expand. Rather than rushing to expand your business, you have the luxury of doing it right. You can conceive of better products, test them carefully to make sure they work and meet buyer needs, and experiment through different business models. Since you are not in a frantic rush to get a product out or build market share, you can do things more methodically.

True, it is harder to advance jeopard or angel essential in sad economic times, but such funding is not the main head of capital for most startups anyway. Research that my collection at Duke University is conducting in partnership with the Kauffman Foundation shows the majority of first-time entrepreneurs fund their startups from personal savings and borrow from friends and line of ancestors.

So you are going to be acquirement money from the same sources whether it is now or during a booming arrangement. The big difference is that you have a chance to build your company the right plan of conduct if you start now—and you have better advantage of it may be being listed on the Dow Jones one day.