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How Startups and Investors Can Create an Upswing During an Economic Downturn - Number 3

In tough economic times, people are often forced to be more creative with how they use their resources. And that same creativity can lead to new and innovative ideas. So, while a recession may not be ideal for businesses in general, it can benefit startups that are focused on innovation.

How Does Recessions Spur Necessary Innovation?

A prime example of innovation succeeding during a recession is Netflix. Netflix almost went under during the Early 2000s Recession spurred by the dot-com bubble collapse and the 9/11 attacks. Things got so dire that they offered to sell their business to Blockbuster, who rejected their offer.

This was a blessing in disguise as the quick-thinking innovators on their team stuck with their initial vision for a subscription DVD rental service and worked through the difficulties of the recession to finally go public in 2002 and post their first profit in 2003 (6.5 million in profit and a revenue of 272 million). By 2004, this number had increased to 49 million in profit and over 500 million in revenue.

Netflix was able to weather yet another recession, the Subprime Mortgage Crisis of 2007-2009, with its segue into streaming video services, increasing their profit from 67 million to 116 million during that time. Their capacity to pursue an innovative market gap despite a poor economy and rocky start, and their ability to foresee the potential for video streaming services in a non- existent market, not only salvaged this visionary company from collapse but skyrocketed them toward success as one of the most successful businesses of their era.

Read about two other reasons why startups and investors can create an upswing during an economic downturn.

1. Less Competition Creates More Opportunities to Succeed

2. Startups That Weather Recessions Are Appealing to Investors

Critical success factors for startups

In order to succeed with innovation, we have earlier mentioned some factors for startups to succeed and for investors to keep an eye on.

1. Business idea - solve a problem better, faster or cheaper!

2. Learn to now your customers

3. Build an amazing team

4. Funding strategy

5. Growth strategy

6. Sustainability as a hygiene factor

Read more about the success factors in this post.

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