So maybe a recession is a good time to start a startup. It’s hard to say whether advantages like lack of competition outweigh disadvantages like reluctant investors. But it doesn’t matter much either way. It’s the people that matter. And for a given set of people working on a given technology, the time to act is always now.
—Paul Graham on Why to Start a Startup in a Bad Economy
(via SvN)
{ 2 comments… read them below or add one }
I dunno how much stock I put in this advice.
Paul Graham is in the business of incubating startups. He puts in tiny amounts of money (something like $10k per startup) in exchange for significant amounts of equity (something like 5%). The hope is that a few of these startups will break big, making that 5% worth a ton.
The implication of this, of course, is that Graham needs new startups to keep popping up on a regular basis. If they don’t, there are no new prospects to replace the ones that flame out, and that means fewer chances for him to spin the wheel.
That means it’s always a good time for Paul Graham to invest in a startup, since his investment is so small and each new investment increases his odds of eventually picking a winner. But does that mean it’s always a good time for you to launch one? Less clear. If you drop out, live on Ramen noodle for two years, plow your life savings into a startup and it flames out, you’re out everything (plus any debt you took on). He’s out… $10k. And then you get to discover the exciting features of American bankruptcy law while he moves on to scratch his next lotto ticket.
Maybe I’d put more stock in his advice if he was putting more scratch into the companies he’s urging other people to build for him. You know?
Good comments, Jason. Of course, that’s the broader context, so it dilutes what I was trying to capture. Which, of course, was measured optimism while we all trudge through this economy. Sort of like this, you know?
That’s the thing about quotes: standalone they often project Idea A, and in full context (and often that’s quite a lot), it’s very much Idea B.