In January 2023, the World Bank released its annual report, which stated that the global economy could come “perilously close” to a recession this year.
That’s a worrisome sentence to read if you’re a founder or aspiring entrepreneur. Why? Because building a startup is inherently risky on its own. Add a looming recession into the mix, and it's enough to scare most would-be founders away from ever putting any time or money into building the business they’ve dreamt about.
But this isn’t the first time the world has experienced the threat or reality of a painful recession—it’s happened before.
And it’s not the first time would-be entrepreneurs have had to decide whether or not to take the risk and move forward with their ideas anyway.
In this article, we’ll make the case for why you should still innovate during a recession, share four case studies of companies that made the decision to move forward anyway, and give you the motivation and inspiration you need to start building your app this month.
Recession is a dirty word. It scares people into thinking the worst is yet to come. It makes them think and act with extreme caution, especially when it comes to spending money on a business.
The prevailing narrative of a recession is this: batten down the hatches. Be careful. Don’t make any sudden movements.
But there’s a case to be made for innovating and launching businesses during a recession. Perform a quick Google search, and you’ll find hundreds of articles from reputable sources that all explain why building a business during a recession might be the best decision you ever make as an entrepreneur.
Here are three reasons why:
First, big, established businesses are much more likely to be tightening their belts and slowing down during a recession. It’s unavoidable for many of them due to massive overhead, high headcounts, and pressure from board members. As an early-stage founder or solopreneur, you don’t have those same pressures. You can act quickly to build an app that either competes with the big dogs or brings forward an innovative idea that makes them obsolete.
Second, less competition may enter the market during a recession. Not every founder or entrepreneur will have the courage to launch a business in the midst of a recession. They may believe that it’s better to wait until the outlook improves. Or they may not be in a financial position to take the risk. This creates an opportunity for you to be the first to market a new idea. It also gives you time to acquire customers and build loyalty with them before other companies start competing for attention.
Third, you’ll be forced to build a leaner, more agile company than others that already exist, and it will be relatively easy to do it. Other more established companies will have to take time mulling over budgets, reducing headcounts, and figuring out how to become more efficient during a downturn. But you’ll be starting from the beginning and can build efficiency into your business from day 1.
Smart innovators and entrepreneurs recognized these advantages during previous recessions and took action. As a result, they built companies that introduced new ideas and changed the way the world works and operates forever.
Not everyone who is brave enough to build a society-changing app in the midst of a potential recession wins. But there are plenty of examples of people who did.
Here are six well-known companies that were founded and able to survive during the Great Recession of 2008:
Tim Chen got laid off in the thick of the 2008 recession, on Christmas Day. He stumbled across a business idea after an email exchange with his sister, who was looking for a recommendation for a credit card with a lower interest rate. With $800, he founded a company called NerdWallet. It started off as a content site that curated recommendations and reviews of financial products.
How did Chen take that concept and turn it into a business worth a staggering $700 million? As an article in CNBC explains, “much of the company’s revenue comes from financial services companies that pay NerdWallet when its readers sign up for a credit card or similar product after clicking through the NerdWallet site.”
NerdWallet went public in November 2021.
Brian Acton is a computer programmer who famously lost millions of dollars in the dot-com bubble and bust of 2000. Most people would be shattered by the realities of losing so much money and would probably avoid similar risks at all costs in the future, but not Acton.
Instead, he went on to co-found Whatsapp, The company was created as an alternative to traditional SMS services, which were a lot pricier at the time.
In 2014, Acton and his cofounder decided to sell WhatsApp to Facebook for around $19 billion, which made Acton’s own net worth somewhere around $3.8 billion.
Toward the end of 2009, friends Andrew Kortina and Iqram Magdon-Ismail were mulling over business ideas. As the story goes, Iqram was visiting Andrew one weekend and forgot his wallet, meaning he had to ask his friend to spot him for the entire weekend. When he got back home, he wished for an easier way to send funds instantly back to his friend.
So the pair started a journey together to create what would eventually become Venmo, a payments app that friends could use to quickly and safely pay each other back.
In 2013, Venmo was acquired by PayPal for $800 million and had approximately 90 million users.
This list wouldn’t be complete without talking about Uber. In 2008, Travis Kalanick and Garrett Camp were traveling together and wanted an easier way to hail a cab. They thought, “what if we could request a cab from our phone?”
You know how the rest of this story goes. The pair would go on to build an app that would transform the transportation industry, impact every major city in the U.S., and change the way people get from one place to another throughout the world.
Now is not the time to slow down, especially if you have what you believe is an app idea that could change the way businesses and people operate forever. Don’t let the narratives around the recession prevent you from taking action when the opportunity is right in front of you.
The founders, entrepreneurs, and innovators who make the choice to move right now are the ones who will have the advantage.
Need help bringing your idea to life? Crowdbotics can help you build better, faster, and cheaper than other options. Tell us what you’re working on, we’d love to be part of your story.
March 24, 2023