The Financial Crisis and Entrepreneurship

If anyone is looking for a silver lining, Michael Fitzgerald has a post called “Bad Times Are Good Times for Entrepreneurs,” and I couldn’t agree more. On September 14, 2001 – at the trough of the technology meltdown, at the beginning of a recession, and on a day when the stock market was not even open because of the 9/11 attacks – I quit my job and co-founded Guidewire Software. It was a great time to start a company for a number of reasons:

  • There were talented people looking for new opportunities.
  • The ordinary costs of doing business (space, equipment, etc.) were depressed.
  • As a private company, you don’t have to worry about quarter-to-quarter performance. Your investors (if you have them) will have a long-term perspective.
  • Most importantly, when you first start a company, you aren’t expected to sell anything, so the fact that no one is buying doesn’t matter. Your jobs are to research your market, research your potential customers, design your product, build your product, and (if you need it) raise money. Depending on the industry you are in, all of this can take a couple of years. Even then, if the recession isn’t over yet, you are selling to a small number of early adopters, who will not be making decisions based on the overall state of the economy. It will be even longer before you have the kind of sales volume that is susceptible to changes in the economic cycle.
  • This didn’t apply to us, but if there is enough dislocation in the economy, it is bound to create new business opportunities that can be captured by startup companies.

Guidewire today is a leading provider of software to insurance companies with customers in Russia, Brazil, Japan, the United Kingdom, Australia, and New Zealand, in addition to the United States and Canada. Seven years from now there will undoubtedly be dozens or hundreds of successful companies that were started in the wake of the credit crisis.

One thought on “The Financial Crisis and Entrepreneurship

  1. Thank you for this one. We incubate startups, and we reiterate this message all the time. Right now, we think anyone with a good idea SHOULD be starting a business to share new ideas with an economy that sorely needs them. The good news is that most entrepreneurs are young and fearless, and clueless about the stock market and the economy anyway:-)

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