Why a recession is such a positive time to begin a business

Written by Sam Keisner, Head of Venture at Startup Giants PLC

The recession of 2007-2009 spurred on many now household names. Dropbox, Glassdoor, Pinterest … Looking back even further, you may be surprised to know that Apple, Microsoft, General Electric, IBM, General Motors, Burger King, and Disney were all founded during world economic recessions.

Timing was as key as ever; in 2007-2009 it was a time of software boom and major infrastructure within companies to adopt new methods of working. Slack for example, was created during the recession and complemented the move that companies were making to time management and team based software. Internal comms were suddenly smooth and instant.

Paying respect to the many people struggling to make ends meet globally, Netflix, Airbnb and Uber all save the everyday person a lot of time and money. The latter two examples taking matters one massive leap further, both enabling everyday people to generate more income on their own terms. Of course those are the concepts that are going to be widespread and see a quick upturn in users.

So why are recessions seemingly such good times to start a business up? Timing, need, strength of concept are always needed, in terms of market gaps and tech, where is there to go now?

Market gaps created by non-consumer conscious brands

Consumers pre-2021 were becoming ever more conscious in terms of ethical shopping – labour hours, production methods, sourcing of materials, delivery methods, carbon offsetting … the list goes on. Today, couple the customer attitude of not wanting to overbuy and create waste, with the need to perhaps tighten their purse strings to preserve cashflow. Suddenly each purchase becomes a highly conscious decision in some way. Those brands who have failed to listen and adapt to their customer’s demands and trends, will fail during the recession, leaving space for new brands to design a perfect product fit and launch to an eager marketplace. It’s conscious shopping on a whole new level.

Access to talent

Many of today’s tech companies grew at exponential rates. Often hiring far more people than was necessarily needed, so sadly during hard times of limited cashflow, hard decisions had to be made about the amount of people hired and the cost of each individual. However, what these companies doing the lay-offs in the last recession didn’t foresee was the pool of sheer talent that now had the time, space and need to finally do what they wanted to do. What had been created was a collective of creative experts all needing money, fast and all keen to work without the constraints of line managers and board members potentially vetoing their concepts.

In today’s economic climate we have already begun to see the same pattern of events happening again. In late 2021 and 2022 all of the major tech companies have been laying off staff again in a similar fashion to the former recession. I don’t know about you, but I’m actually intrigued to see what levels of innovation and tech emerge from this recession. With Web 3 and the Metaverse likely to becoming deeply embedded on the horizon, new scales of AI as we’ve never seen it before, can be opened up to provide new methods of meeting and interaction.

Looking to the verticals for investment

Thinking further on this point, I’ve been exploring my top three verticals which I believe are likely to see growth and soar over the coming years. Cyber security is the first one that springs to mind that is just so ripe for investment right now. That said, there is a deluge of concepts each vying for investment, yet not one offering a holistic service to encompass the needs of companies. The issue here, in my opinion, is that often the solutions are trying to focus on all sizes of businesses. Larger businesses need a totally different cyber approach to localised SMEs or online companies, so if that segregation can occur then it’s my belief that people will be on to a winner with their solution based products.

Eco innovation is the next obvious area. Whether it’s lithium or hydrogen based products, sustainability and net zero attitudes are being embedded into every aspect of consumer goods and workplace processes and codes of conduct. A sustainable future is supported by governments globally so therefore ripe for investment if the product offering is well thought out and scalable. Tech in every single aspect of sustainability is relevant to monitor outputs and levels of emissions/effectiveness so competition is fierce. What we’re seeing a huge amount of at Startup Giants, is founders opting to hone in on a very niche aspects of this particular vertical, so it’s whether growth is predicted in the vertical as a whole which will define the success of each space and innovation.

Fintech is not going anywhere. With IoT, crypto payments, an increase in digital with web 3 and AI, this area is still, and will for the foreseeable future, always need tech innovations. I’m intrigued to see what happens in this space, based on my comments earlier on about talented people being laid off. Because this area of industry is so regulated, solutions need to be robust and still dynamic. Fresh thinking experts with industry experience are already in just the right position to fill gaps if they can take the leap and get started.

Tech joins people together, it expedites processes, it makes the impossible, possible. Think of your daily lives, there will be an idea in maybe as little as three year’s time that you will have embedded into your daily life that will have been borne out of this current recession.