Jason Santos is a celebrity chef in Boston, known for his blue hair, frequent TV appearances and mouth-watering food. This week, in probably the worst economy restaurants have ever experienced in modern times, is his launch for construction on a new restaurant, to open in August. Unlike his flashy restaurants in Boston, this one will be up in the suburbs near the ocean in a renovated gas station. There will be more outside seats than inside seats. The menu will be take-out friendly fish and chips. No TVs. No liquor. “I’ll try to do the nicest takeout place they’ve ever seen,” he told The Boston Globe.
Laisun Keane decided in April, when no one was allowed out of their homes except for essentials, to start an art gallery. “I thought, just do something now,” said Keane, who opened her commercial art gallery in Lexington, Massachusetts. “It meant I had to use the Internet more than ever.”
While Jason and Laisun may seem slightly insane, some believe that a recession is a great time to start a business. They point to data that shows that nearly half of Fortune 500 companies were started during a recession, including icons like General Motors, IBM, Microsoft, and Whole Foods. While not the household name as the previous companies yet, WeSpire was started in the midst of the Great Recession, in 2010.
One theory for success is that a recession lowers barriers to entry. Talent is more available and more affordable. Real estate is cheaper. Borrowing rates are lower. Another is that those that can survive hard times have a product or model that can then boom in good times. But “the principle dynamic that propels entrepreneurship during downturns is necessity,” says John Dearie, president and founder of the Center for American Entrepreneurship. “Someone may be harboring an idea for a new business and was just handed the circumstances that allow him [or her] to take the leap.”
What I also noted about the stories from Santos and Keane, and experienced myself at WeSpire, is that the new businesses leverage real-time market opportunities and restrictions. Santos is focusing on take-out and outdoor dining. Keane is making her gallery work, even though no one is allowed to step inside the space right now, by leveraging digital. WeSpire tapped newly emerging social networks and gamification features to build a more effective application. We benefited from the general move to software as a service applications in the enterprise. We had no legacy “on premise” software to worry about. We never assumed we’d have the luxury of training people how to use our software so we made it super simple to use. We knew we wouldn’t have the resources to customize the software using teams of implementation and consulting engineers. As a result, we built it so non-technical people could just configure it, which keeps our implementation times short and our costs low.
While economic downturns can catalyze entrepreneurship, it doesn’t make being an entrepreneur easier. Capital is certainly more difficult to raise. As a wise private equity investor once advised Mr. Stevens, “Banks never loan you money when you need it. So get it before you do.” Demand is softer so you need to have an incredibly compelling proposition to survive, and many don’t.
My personal experience suggests another X factor for why starting in a downturn works. People are hungry for something good and positive to support, particularly when the rest of the news is so depressing. I got an extraordinary amount of help starting WeSpire from amazing people who joined my “kitchen cabinet.” People agreed to join the company for little to no cash, taking equity instead. We sat around my dining room table for nearly a year. Then I got free office space from some friends. Hundreds of people volunteered to be beta testers on our “Motherboard.” I worked harder than I ever had in my life. But it was exhilarating, rewarding and set WeSpire up with one of our core foundational values: We all need help. Ask for it.
So if you have an idea in your head and no good reason, ignoring the pandemic and an impending massive recession, not to do it, I say go for it. Read Adam Grant’s, “The Originals” before you do. Take “smart risks,” like keeping your day job if you are lucky enough to have one as long as you can effectively do both. Ask for help, whether time, talent or treasure, from everyone and anyone. Just launch. Because right now, the world needs brave people like Jason, Laisun… and you.
Quote of the Week: Passion, creativity, and resilience are the most crucial skills in business. If you’ve got those, you’re ready to embark on the journey.Jo Malone