During a recent recording of the This Week in Local podcast (please subscribe), my co-host Mike Boland and I talked about some of the topics we spent a lot of time with during 2022. Any time there is a backward-looking conversation, some forward-looking discussion inevitably seeps in. And this conversation was no exception.
One topic was both backward-looking and forward-looking. That was whether the coming year will be a new “golden age of startups.” Many expect 2023 to be recessionary (a debatable point that we’ll leave to economists). The question is forward-looking because, well, it’s about next year. It is also backward-looking because it invokes lessons from history.
Many of the biggest and most successful companies we follow on Localogy Insider were launched during economic downturns. This well-known correlation between startups and downturns led to a brief but enthusiastic discussion on the episode, specifically on whether 2023 will be such a year. We also kicked around metaverse hype, the rollback of quick commerce, and, notably, the future of the tech unicorn. Or at least the future of the use of the term “Unicorn” as we move forward in 2023 and beyond.
Historical Trend
As noted, history supports the thesis that downturns are great times to launch businesses.
The last big downturn was The Great Recession. That event technically ran from December 2007 through June 2009, though many felt it was still in effect through 2010. For this exercise, we will consider these the Great Recession years, 2008-2010.
For example, Airbnb (2008), Slack (2009), Square (2009), Uber (2009), Instagram (2010), and Pinterest (2010) are all Great Recession babies.
Great Time to Start a Business
Another such company familiar to the Localogy world is the website builder Duda, which also launched in 2010. In November 2020, well into the Covid-19 lockdowns that produced recessionary economic conditions, we interviewed Duda founder Itai Sadan. In that interview, we talked about why downturns are such a good environment for starting businesses, a view Itai wholeheartedly shared.
The Virtues of Specialization: A Conversation with Duda’s Itai Sadan
“It is the best time to start a business…,” Itai said in the interview. “Tough to get funding perhaps. But what isn’t tough to get is employees.”
This statement feels as true now as it did in 2020. Itai touched on one of the main reasons founders love downturns, which we also discuss on the podcast. The availability of talent. The overall U.S. labor market remains strong. Yet we have seen some very large layoffs recently at big tech companies like Twitter and others. Most expect these layoffs to continue into 2023.
This movement to cut costs, particularly in tech and media, while painful for many, has unleashed many young, skilled, and talented people into the wild. And this will probably continue to happen into the new year. Some of these newly unemployed will launch new companies. Others will go to work for those startups.
During a downturn is the time to build and iterate, Itai said back in 2020. So that when the economy picks up, the businesses will be poised to scale.
What About the Covid Cohort?
Itai also wondered when we spoke in 2020 if the Covid period would produce some great companies.
“It will be interesting to see a couple of years from now the companies that were started in this period,” Itai said back in 2020.
Many companies were launched in 2020 and 2021. Here is one list, for the curious. Many have an AI angle. And many of these Covid-era startups will no doubt scale, go public, or otherwise create great wealth. In fairness, these are generally not yet household names. After all, they haven’t had nearly as much time to scale as the famous Great Recession babies.
