Funding Down? Bankruptcies Up? It’s a Great Time to Start a Business. Or Is It?

Is now an especially good time to start a business, or be an early-stage company? That’s the thesis of VC Zach Weinberg’s tweet that went viral in startup-land, in which he asserted: “Sounds crazy but [now is the] best time to be an early stage founder.”

That depends a lot on your situation.

Arguably the most popular claim about startup timing comes from founder and investor Bill Gross, in a TED Talk he delivered back in 2015. After studying 200 companies, he concluded that timing is, in fact, the most important factor contributing to their success or failure. If you can just time your company or product correctly, the implication is that you can make sure you’re on the right side of that divide.

Good to know, but how are you actually supposed to use that information as an entrepreneur? First of all, the timing discussed there by Gross isn’t about the sort of things you can easily know, in the way you can bone up on broad economic conditions by reading reports. It’s about whether now is the perfect time to get your potential customers to want to adopt your product. Countless companies have been too early with a product that some other company would later go on to launch to great success.

Second, most entrepreneurs don’t have the luxury of choice when it comes to timing. Sure, everyone chooses a date to launch their company, but once they’re on a path of launching, they don’t usually have the option of delaying the company or its major initiatives for a period of six months or more (though you can choose to put off quitting your job while you launch, which can help in any economic environment).

A third reason why it’s hard to capitalize on the “timing” insight: If you target your company too much toward success in the specific environment you’re in today, you are likely to fail when — inevitably, eventually — that environment changes.

But what about other ideas of timing, specific to the kind of economic environment we’re in now? The research in this area offers some guidance. A 2020 paper by four economists who studied entrepreneurship amid “exogenous shocks,” or big events outside of an entrepreneur’s control, does a good job of surveying much of the work in the field and offering some conclusions.

A key insight: “Existing evidence suggests that firms created during major shocks tend to perform better over the long run.”

However, while this fact is much-cited in both research and statements by startup founders and investors, economists don’t have enough data available to determine whether or not this better performance could be attributable to selection bias. It may be that the companies that succeed in difficult economic environments happen to be the best companies in the first place. In succeeding when many others fail, they will also tend to perform better later on, during easier times.

For companies that need to pivot due to economic shocks, there is reason to believe that the economic conditions benefit newer companies more than than established ones. They’re more flexible, able to recognize opportunities, and adjust their teams’ focus to respond to stress.

When it comes to hiring — a major challenge for startup founders — downturns can be a better time for getting talent on board, if a company has sufficient access to capital for that hiring. Today, many large companies are freezing hiring or even cutting their teams; if you’re in a hiring phase, you’ll have access to better talent for less than even just a few months ago.

There’s a special advantage here if you’re one of the companies that has figured out how to create a good remote-work culture. It’s clear that remote work is here to stay, at least in certain industries and for certain positions, and for at least part of the week. If you’re paying less in real estate and overhead, and your teams are spending less time commuting, that can boost your recruiting efforts — in addition to improving margins.

This economic climate can also be a great time to acquire a company. Valuations are down for many businesses from a few months ago, so if one of your best paths to growth is through acquisition (something that many Inc. 5000 companies tell me has been essential in their path to four-figure growth), now could be a good time to start having those conversations with competitors or companies offering adjacent products or services that would be a good match for your current offerings.

So back to our original question: Is now truly an especially good time to start a company or be in the early stage? If you have access to capital, the answer is probably yes.

But there’s also a sense in which the best time to work on your business, or launch a new effort, is almost always “as soon as possible.” Ultimately, in almost any project, the best time to have started work was yesterday, making today second-best at best. If you’re going to put as much of yourself into your company as the average founder, you’re going to have a lot of work to do, regardless of when you start it. And the payoffs will be years down the line.