YES–Now is the Best Time to Start a Business

Why Now is the Best Time to Start a Business (in the market and right out of HBS)

The current economic environment has sparked worry and confusion as students have begun to struggle with summer and full-time recruiting. Despite the fact that the Dow teeters above 7,000, and we are in the midst of the worst recession since the Great Depression, a subset of students is advancing the rich tradition of entrepreneurship that Harvard Business School has engendered for the past 100 years.

While the typical stories of HBS entrepreneurship are dominated by late-career entrepreneurs, many successful companies, including Yelp, Snapfish, and Guru.com, were launched by MBAs directly out of HBS. In the wake of the downturn, student interest in starting businesses immediately is growing dramatically – entries for the HBS Business Plan Contest are up over 60% in total (20% among ECs) and the Entrepreneurship Club is enjoying record membership numbers.

Over the past few months, many have said that the “opportunity cost” of launching a business is lower. However, this reactive mode of thinking is at odds with the proactive spirit of entrepreneurship. Rather, I believe that increasingly resourceful HBS students are identifying more market opportunities and have better support structures in place to pursue these opportunities and form new businesses.

This proactive mindset is critical in the current market which presents a wealth of opportunity for the right products and services. Current entrepreneurs can find inspiration in the fact that Google, Microsoft, Apple, and Cisco are just a few of the companies that started in downturns. In these market conditions, capital becomes harder to raise, but many aspects of a new business (e.g. recruiting, office space, and technology) are made easier/cheaper. This tradeoff is incredibly nuanced, and thus I turn to a variety perspectives from current student entrepreneurs, recent alumni, faculty, and investors to shed more light on why now truly is the best time to start a business:

Entrepreneurship in this Market:
“Technical constraints breed technological innovation while economic constraints breed organizational innovation. The companies that overcome both these constraints will be the titans of tomorrow.” – Marcus Ogawa, Quest Venture Partners

“Shortage and adversity are powerful stimuli for focusing the mind.” – Bhaskar Chakravorti, HBS Professor of Entrepreneurial Management
“Many very successful companies have been started in downturns. If you can find customers and investors during a deep recession, you’ve got a great product, which means your long-term success odds should be higher.” – Tom Eisenmann, HBS Professor of Entrepreneurial Management
“There are so many obstacles starting a business that are much harder to overcome than just the overall economy – if you let this one stop you, you’ll never start a business anyway.” – Michael Reich (HBS ’08), Co-Founder/CEO of UpDown
“Startups should be built to run lean and agile always. A startup’s sole purpose is to survive until that exact moment when a unique inflection point offers the company the rarest of opportunities to move forward with great success.” – Marcus Ogawa, Quest Venture Partners
“If you’re a CEO who has some capital, your life is easier: the resources you buy, whether employees, office space, supplies, or travel, are cheaper. People work harder, there’s less turnover, and vendors work with you on flexible payment terms. It’s a two-way street, though: no one’s giving you a free lunch, and you’ll need to work twice as hard for a sale. You’ll be forced to watch both your expenses and your top line every single day.” – David Vivero (HBS ’08), Founder/CEO of RentJuice
“Times like this force entrepreneurs to be more disciplined in growing the business. If you’re a social networking startup with tons of users but no promise of an attractive economic model in sight, it will be incredibly difficult to get funded. That said, from a personal standpoint, your opportunity cost is at its lowest during this time.” – Karen Ong (HBS ’08), Founder/CEO of LanguageInternational.com
“In good times, customers are fat and happy. It’s more difficult to change the way they do business with an innovative solution. In bad times, customers are in pain – this pain is what opens their mind to new solutions.” – Oliver Roup (HBS ’09), Founder of VigLink

Launching upon Graduation or Later in Your Career:
“If an opportunity presents itself and you’ve been waiting for it, take it when it comes (maybe before graduation, immediately after, or beyond). There are no rules, you can find examples at all career stages, just make sure you are prepared for the strain a startup will put on your life (finances, family, etc).” – Jeremy Stoppelman (HBS ’05), CEO/Co-Founder of Yelp
“You can always tell yourself the story of why you need a few more skills or a little more experience, but sooner or later you have to do it or not do it.” – Oliver Roup (HBS ’09), Founder/CEO of VigLink
“As you head into later stages of life, with a mortgage to pay and kids to feed, it’ll be a lot harder to make the leap, so if you have the passion now and your personal life lines up with a market opportunity, carpe diem. The big caveat is to make sure you have a clear picture of the problems that your early-career leap could introduce and that you should focus on finding the right people and resources to help you avoid those problems.” – Noam Wasserman, HBS Professor of Entrepreneurial Management
“I think one of the creativity killers for MBAs is that so many fantastic and high paying positions have historically been presented to HBS graduates. If the options available aren’t as attractive that will likely push more talented people towards starting a great business they otherwise might not have. My only warning to those considering is this: Are you ready for the ups and downs or do you value stability? The entrepreneurial lifestyle is a roller coaster with extreme highs and lows, you need to be prepared for that.” – Jeremy Stoppelman (HBS ’05), CEO/Co-Founder of Yelp
“Only start a business if you have found a market you love. Starting a company has very little to do with age, and has everything to do with passion, insight, and sacrifice. Your age can’t be a factor, now or decades from now.” – David Vivero (HBS ’08), Founder/CEO of RentJuice

Industry/Sector Focus for Startups
“Good entrepreneurs find opportunities in changing environments. In the current economic climate, major sectors of the economy – the entire financial sector, energy, healthcare and education will be going through gut-wrenching restructurings that will require new services and solutions. It will be an opportunity rich and resource-starved environment that is a fertile breeding ground for new ventures.” – Shikhar Ghosh, HBS Professor of Entrepreneurial Management
“There will be an unprecedented amount of federal dollars for business ideas that dovetail into the stimulus package. In other words, the creativity, obsessiveness and resilience of the entrepreneur is going to be tested in ways never seen before by any of us.” – Bhaskar Chakravorti, HBS Professor of Entrepreneurial Management
“A new venture might not exit for 5 – 10 years, so you don’t want to make a long term commitment due to a temporary market condition. I advise pursuing the experiences and relationships that can get you to where you’d like to be when the economy rebounds. You have to do what you’re passionate about.” -Phil Michaelson (HBS ’09), Founder/CEO of KartMe
“During downturns we need substitutes for many necessities that we have to scale back on; for example, we need to repair old cars to keep them running longer instead of buying a new car. We also need to have affordable luxuries – after all given the gloom and doom, we need to indulge ourselves in some way without busting the bank; upbeat, low-cost distractions are great.” – Bhaskar Chakravorti, HBS Professor of Entrepreneurial Management

Tips for Running a Startup in this Environment
“1) Relentlessly prioritize: there’s never a more important time to make sure your limited resources reflect the right people doing the right activities, with all fluff off the table

2) Aggressively accumulate top talent: downturns are great times to upgrade human capital resources with little or no cost uptick

3) Manage capital investment:ÿ Seek funding early because capital can become unreasonably scarce in times like these–we’re lucky to have no such problems, but as a Venture Capitalist during a downturn I’ve witnessed the funding environment become overly conservative

4) Aggressively contain costs: it’s amazing how many things you realize you don’t need, and employees will understand if you do a great job of communicating with them

5) Overcommunicate: Whether it’s investors, employees, customers, or partners, playing the false morale game is counterproductive in the long term. Be open, even-handed, and extremely honest, and you’ll maintain credibility when discussingÿthe long-term strategic viability of your business” – Rishi Garg (HBS ’08), Co-founder/VP of Business Development of FanSnap.com

“If you choose to start, you’ll probably have to rely on close friends and family for capital. Keep the burn super light, pay yourself as little as possible. Get your personal overhead low. Paul Graham likes to talk about getting “ramen-profitable”, and I think that is a good strategy right now (when the economy still hasn’t bottomed out).” – Jeremy Stoppelman (HBS ’05) CEO/Co-Founder of Yelp