Startup Strategies in a Recession
By Laura Duggan
Here’s how to steer your ship through shallow waters.
It’s 2009, and we are not only into a recession, but all the indicators point to a long, slow recovery. Yet you are an entrepreneur…you’ve put time and money into executing a great idea. What to do now? Two areas need attention: how to get seed money, and how to stay afloat with or without it.
Getting Seed Money
The landscape for investments is different in a recession—everyone is just a bit more wary, and a bit tighter with their money. That being said, angel investors are not known for stuffing their money under a mattress. They will still go after worthwhile ideas. If your product or company is a clear winner despite or because of a recession, don’t let fear take over. Rather, change your strategy. Here are two strategies:
- Grow the business in much smaller increments, and go after smaller investments.
- Be willing to take lower valuations on the financing rounds you go after.
- Say yes to whatever offers come your way
Steering the Company
In addition to fine-tuning your approach to getting finance, this is the time to really look at the company budget and direction with a microscope. The areas that stand out the most are where the dollars are going. We suggest you examine and reduce the following, temporarily:
- Marketing, especially in markets that are flat due to recession
- Development of new features, especially if the product is fairly good for now
- High-cost executives who will be needed when you are big, but perhaps not just now
In addition to reductions, here are the areas where positive attention will pay off:
- Keep your eye on the goals for each quarter and meet them
- Keep your current investors informed
- Make sure you know where the sales are coming from—look ahead.
- Stick to your budget
A recession, according to the dictionary, is a period of an economic contraction, sometimes limited in scope or duration. Contraction is not the same as collapse, nor is it the same as stagnation. Your new idea can and should go forward, recession or not. It’s all in a realistic approach.