In 2008, the US had slumped into what is now known as the Great Recession. American households had lost about $19 trillion of net worth, and 8.7 million lost their jobs.
If I had to make my argument for starting up during a recession in one word, I’d say- Apple. The world’s most inspiring company was not only started during a recession, but has weathered many economic turmoils since, and is dubbed recession-proof by some in the market. It was launched in 1976, when the US was battling an oil crisis coupled with a stock market crash which led to a 16 month long recession. Apple stuck around and how. In 1980, it had the biggest stock market launch since Ford in 1956. In 2001, the US faced another recession, called the 9/11 recession. That was the year the iPod was launched and Apple was reborn. In fact, CEO Tim Cook has been quoted saying, “We believe in investing during downturns.”
Children of the Great Recession in India
Within the 3 months of October to December 2008, 5,00,00 people had lost their jobs. However, in 2008, 7000 startups also in India. Some of the most successful startup stories in India were born in this very year. These include Zomato, Practo, Quikr, Policy Bazaar, and Bank Bazaar.
Zomato, which revolutionized food delivery and restaurant hunting in India, was started as ‘FoodieBay’ in 2008. It began with the simple aim of making an internet directory of restaurant menus by IITians Deepinder Goyal and Pankaj Chaddah. With a team of just 6 people, FoodieBay had become the largest restaurant directory in Delhi NCR by late 2008. On the other hand Practo, an online service which connects doctors and patients with two different products facing each stakeholder, also began in 2008. Despite factors like internet distrust, and psychological barriers of connecting with doctors on the internet, Practo persisted and acquired a Series A funding of $4 million in 2012, and 6 other rounds thereafter.
2020: Recession in the works
Here’s the current picture. The International Monetary Fund (IMF) reckons that ‘Great Lockdown Recession’ could be the steepest in almost 100 years and recovery predictions are only going to get worse as the Corona crisis worsens by the day. The global GDP is projected to shrink by 3% this year, the biggest plunge since the Great Depression of 2008. IMF has slashed India’s growth estimate for FY21 from 5.8% in January to 1.9% now.
How startups can exploit a recession?
Recessions can present new problem areas and thus newer opportunities in the market. Pain points spell nothing but opportunity to the entrepreneur which in the world of entrepreneurship is called getting the “timing” right. For example, a product/service helping you save money might not have been as lucrative during a boom, but can suddenly prosper during a downtime. It is probably the best time to match value propositions with market realities. While you figure out that strategy, remember that ethics are key in the long run. Selling essentials during a crisis is strategic, unless you sell them at unfair prices.
Secondly, the most directly visible effect of a recession is the number of people around you losing jobs. Your startup can be provide an opportunity to them to work on something with more ownership and autonomy, and a chance for you to rope in top-notch expertise. At the risk of sounding overly optimistic, a ‘testing time’ is only perfect to build the most loyal team. A team that weathers the storm together and emerges out of it is bound to be more loyal to the company.
2020: The next wave of tech startups ?
Startups have already gotten busy contributing to the need gaps created in this unique socio-economic and healthcare crisis. Kochi-based Asimov Robotics, with the help of Kerala Startup Mission, has started an awareness campaign using two robots distributing masks, sanitisers, and sharing information. Two startups by IIT Kharagpur alumni have been working on a ‘Robo-Sapein’, a device for mass sanitization, and AI-based application for information solutions. Another IIT-incubated ‘MedTech’ start-up called Aerobiosys Innovations has created a low-cost ventilator for hospitals.
On the other hand, security concerns regarding the widely used Zoom app have opened up a raw opportunity for EdTech to come up with secure video interfaces for learning. Learning with AI and ML is the next logical step.
Just like Zomato and Policy Bazaar harnessed the internet and app boom, the next crop of startups will soon be here to harness 5G, Artificial Intelligence, and Virtual Reality. There is scope for better MedTech, better EdTech, and better tech in general. The much-awaited government stimulus for industries and MSMEs could definitely help a great deal, too. I can only hope that we are not one bad policy decision away from discouraging growth.
While the government and investors are not in your control, your ideas and execution capabilities surely are. Call those white-collar friends who always wanted to make the big jump, and start fostering your ideas.
Snehal is Columnist at GGI.
She is a writer, poet, music aficionado, Oxford comma proponent, and a lot of other things. She also writes on personal finance for 'Qrius Creative Labs'. She has worked as a copywriter, content writer, scriptwriter, creative strategist, and direction assistant at multiple organisations in the past.
Snehal is a graduate from the Bachelor in Mass Media, Advertising from St.Xavier's College, Bombay.