BlogKnowledge Why recession may be the perfect time to start your tech business


July 17, 2022

Why recession may be the perfect time to start your tech business

I have started five businesses in recessions and have some fantastic news for anyone currently building or thinking about building in 2022/23. This looming recessionary period will likely be the best thing that ever happens to you and your new business.

For context, here are the businesses I have built so far;

  • Automated Job board technology
    Launched 2001 (recession year) – successfully sold in 2005
  • SaaS Recruitment Management System
    Launched 2007 (recession 2008) – successfully sold in 2020
  • Web3 Hiring Tech + Retail/Hospitality Hiring Tech
    Launched 2022 (x3) – early days, but we are making sales already, and progress looks very promising

I won’t go so far as to say that building during recessions is WHY our previous businesses succeeded. A number of factors played significant roles (for example, I have been blessed to have met and latched onto some incredible people along the way). However, I will confidently say that we built better businesses and company cultures because of the market conditions.

Here are nine reasons I think building your business during a downturn is the best thing to happen to you and your business.

1. You are forced to build things people will pay for

Pretty revolutionary, right? “Build things people want to buy”.
In a financially challenging market, you have little to no chance of building a business without making things that customers will pay for right away. You don’t have years of runway to build fanciful products that people may or may not use. In a downturn, venture capital is harder to come by, and customers are more selective about where they spend their money, meaning you have to find product-market fit, and fast!

Product-market fit should always be the highest priority for a startup. Still, it’s incredible how many founders think they can raise a suitcase full of money and then iterate and pivot their way to eventual success. Unfortunately, this is not reality, and you are creating a huge advantage for yourself by learning how to get to product-market fit fast.

2. You will master financial discipline

Money is harder to come by in a downturn, so we must (a) earn revenue quickly and (b) exercise a high degree of discipline with the money that we do have.

A downturn is no time for wasting money on things like sexy offices, merch to show your mum, meetings, sponsoring conferences, billboards, consultants, marketing agencies, etc. Instead, you will learn how unimportant all of these things actually are. You will see exactly what matters and what does not, and that knowledge places you in an elite position as a founder.

Side rant: I mention meetings above because I think that is a fantastic example of the difference between a scrappy startup and a fat, lazy funded business. Startups with the fear of God in them don’t sit around in meetings half the day. Meetings are ‘busy work’ and are the enemy of productivity. Successful startups keep meetings quick and informal (if they have to have them at all). A quick phone call or Zoom chat nearly always trumps a scheduled meeting. If you build a business during a recession, you will learn this and hopefully develop the muscle memory to maintain a culture of minimal meetings.

3. It is easier to build your A Team

Talent is the key to the success of your venture, so anything that helps you to find better people is an enormous advantage.

It can be easier to find and attract top talent in a less frothy, less competitive market. As the crazy, near-free venture money dries up, VC-backed startups throw a lot less funny money at their teams. You will find it easier to identify and attract exceptional people and also probably be able to afford them.

4. Customer success forms part of your DNA

In a tight market, you need to work harder to find, attract and retain customers. You simply cannot get away with customer churn in a recession. I can’t stress this enough, but you absolutely cannot accept or allow customer churn.

Building in a downturn forces a culture of customer success into your business. If managed consciously, this will form part of your business DNA and stay with the business long after the recession is in the rearview mirror. I am proud to say that we did this very well at JobAdder, and that customer success culture is still in the DNA of the business today, even under new owners and management.

5. Build product WITH customers, not just FOR them

Building with customers is entirely different to building products for them.

Product is always critical, but in a down market, you have an incredible opportunity to get close and intimate with your early customers and work on the product together. You both have the time and motivation when the market is less frenetic. By getting alongside customers (and I mean literally sitting beside them), and understanding their needs, you will (a) form relationships that will span the lifetime of your business and (b) understand their needs and pains in a way that will allow you to create an exponentially better product.

We did this at JobAdder in 2008/09, and most of the first 50 customers we signed during that period were still with the business when I exited 12 years later. Not only do those customers help you create a better product, they become lifelong advocates. They will help you with references, testimonials, speaking engagements, podcasts, new client referrals, and just about anything else you ask of them.

6. There’s no time for wokeism or entitlement

Building in a downturn requires a discipline that does not allow for wokeism or entitled behaviour in your teams. That rubbish can be stamped out in your new business before it even thinks about beginning. The great news is that you are starting fresh, so you can ensure that you screen these things out carefully during interviews. You can discuss your stance with all new employees and ensure that everyone coming into the team knows the deal.

By not hiring it in the first place and clearly communicating that “we don’t have time for this”, you can ensure that your new business creates and maintains, a relentless focus on customer success and product.

7. Your mission trumps perks and benefits

Perks are lovely, but you can put them away when building during a recession. People are happy to work hard for a job they love and a mission they believe in. You don’t need the pool table, ping pong tournaments, canine pregnancy leave, squirrel appreciation holidays and the like.

Focus on the core mission and rally your entire team around that. Make your mission the focus every day, and watch how that quickly becomes the thing that makes people want to come to work. Making incredible products for engaged customers is about as fulfilling as work can get.

8. Founders are in the trenches

Building in the most challenging market conditions requires founders to have their sleeves rolled up and be in the trenches. In my opinion, founders should always be in the trenches, especially early on; however, in a recession, you have precisely zero choices in the matter.

Founders starting and growing businesses through recessions will almost certainly be gritty types with a predisposition to getting in and getting it done. By being in with the troops, you will be more closely aligned with product, customers, and have more empathy for what your teams face daily.

I think being a hands-on leader is a massive competitive advantage in any market, so use this opportunity to get in there and get to know every nut and bolt of your business.

9. You will be in pole position to scale

Building in a more challenging market forces you to build with efficiency. You will automate and streamline systems, minimise constraints and overheads, and get more done with fewer people. If you do this consciously, it will become a habit, thereby positioning you perfectly to scale responsibly, intelligently and efficiently when the market inevitably bounces back.

It is very, very difficult to build efficient, scalable processes in a booming market, so take the time to do it now while you can.

So there you have it, folks. If you are about to start building, are building currently, or contemplating building, I hope this article encourages you to roll up your sleeves and go for gold. If it is any additional encouragement, my team and I are here alongside you with our sleeves rolled up too. If you want to chat about any aspect of this article or your experience building in a downturn, please reach out to me via brett {at} cryptocrewdotcom or via LinkedIn.

And if you enjoyed the read, follow me on LinkedIn so you can catch my next article, “How to fund your new startup without VC“.

Brett Iredale

Brett Iredale