When the economy is lagging, investing money into any type of venture can seem precarious. But there are many lucrative opportunities for investors to take advantage of, especially if you consider how many startups thrive during times of economic turmoil. During these times, larger businesses often cut back on spending, creating opportunities for startups to fill major market gaps and move into winning market positions.
Why startups should make Lemonade
The old proverbial phrase, “when life gives you lemons, make lemonade” applies aptly to our current economic forecast. Downturns will always test the resilience of a company, but because startups are agile and nimble, they often weather these circumstances very well. Their ability to redirect resources and focus their small teams on the most lucrative projects is a luxury that some larger companies do not have—and this is why some startups are valuated highly even when the economy is sinking.
In this and coming two blog post we list three reasons why startups and investors can create upswing in economic downturn.
Less Competition Creates More Opportunities to Succeed
During prosperous economic times, the trend is to start a business. But when a recession hits, many would-be entrepreneurs put their plans on hold. This creates a less competitive environment for startups that stay the course.
Take IBM, for example, which was founded in 1911 during The Panic of 1910–1911, a recession that occurred after the enforcement of the Sherman Antitrust Act. Originally named CTR (the Computing-Tabulating-Recording Company), the company braved the unsteady economy to sell and lease their machines, which included tabulators, industrial time recorders and commercial scales.
The market needed these innovations, and there was little competition, leading to CTR’s rise and eventual name change to IBM (The International Business Machines Corporation). The company is still around today, having succeeded through many other recessions. In 2021, their revenue reached 57 billion.