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How Startups and Investors Can Create an Upswing During an Economic Downturn - Number 2

Updated: Oct 28, 2022

While no one wants to see a fraught economy, there are some silver linings for both startups and investors. With less competition and more opportunities to get funding from cautious investors, there's potential for startups to thrive.

Recessions spur necessary innovations as people are forced to get creative with their resources. Just look at many great success stories of the past and you’ll find that many revolutionary startups thrived during economic duress because it was the right time and place for their idea to flourish—two priceless factors that should never be overlooked when assessing a business’s potential, and there are more.

Startups That Weather Recessions Are Appealing to Investors

Investors are always looking for companies that will give them the biggest return on their investment. But during times of economic duress, they become more cautious with their money. If they are going to invest, they want to see that a startup has a solid business plan with risk mitigation strategies to make money even during an economic downturn. If a business plan is truly sound, the startup will be able to withstand a recession, convincing perceptive investors that this business has what it takes to garner sales when consumer spending is low, but more importantly, the potential to make incredible gains when consumer spending is high.

In other words, many investors are willing to take risks during times of economic turmoil because they know that there's the potential for greater rewards when the economy eventually recovers. Likewise, businesses that can survive tough economic circumstances often come out stronger on the other side. They've had to make tough decisions and cut costs to stay afloat, and this can make them leaner and more efficient operations. As the economy improves, these businesses are well-positioned to take advantage of the upturn and grow rapidly.

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