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Recessions, or the economic conditions formerly known as a recession, can understandably cause anxiety. Whether or not America is technically in a recession, many companies are making recession-like decisions—laying off workers, trimming budgets and adjusting forecasts. And while every industry has nuances driving decision-making, for prospective entrepreneurs, down markets can be fertile ground to take the plunge.
Many notable businesses were founded during recessions, including Microsoft, Disney, IBM and General Electric. And more recently, tech startups like Uber, WhatsApp and Venmo. My own entrepreneurial journey started during the subprime mortgage crisis and its corresponding recession. The reality is, constraints can be a catalyst for creativity. Or as the cliche goes, “Necessity is the mother of invention.”
Beyond historical trends, recent data points to the dynamism downturns can foster. According to the Economic Innovation Group, using U.S. Census data, new business applications have flourished in the wake of COVID, with 2021 and 2022 having some of the highest numbers for new-business formation on record.
Last year saw a total of 5.1 million new-business applications, according to the U.S. Census Bureau’s Business Formation Statistics, with nearly 1.7 million businesses likely to hire employees. This represents a 27.8% increase from 2019. Indiana is ahead of the national average, seeing a 37.7% increase in likely employer business applications during the same period.
As the risk of job loss is higher, some in the middle of their career should consider entrepreneurship. Because, in spite of the mythology surrounding startups being the domain of 20-year-olds stuffed into garages in Palo Alto, 42 is the average age of successful startup founders, according to a 2018 study. Those who have encountered real problems in real businesses are best positioned to understand what’s needed to find solutions that can be commercialized.
Paul Graham, who co-founded Silicon Valley-based accelerator Y Combinator, which has invested in over 3,500 startups with a combined valuation nearing $1 trillion, suggests, “The way to get new ideas is to notice anomalies: What seems strange, or missing, or broken? You can see anomalies in everyday life (much of standup comedy is based on this), but the best place to look for them is at the frontiers of knowledge. Knowledge grows fractally. From a distance its edges look smooth, but when you learn enough to get close to one, you’ll notice it’s full of gaps. These gaps will seem obvious; it will seem inexplicable that no one has tried X or wondered about Y. In the best case, exploring such gaps yields whole new fractal buds.”
Indiana’s entrepreneurial ecosystem is well-positioned to support aspiring problem-solvers. See a business problem or market opportunity that merits exploration and potentially a software solution? Talk to Mike Langellier at High Alpha. Unsure if your idea solves a problem and want an experienced team to help workshop it through a “pressure test?” John McDonald at Next Studios is ready to support you. Not sure where you’ll get funding? Elevate Ventures invests in “high-potential cross-sector innovative companies with a minimum $500M total addressable market at the pre-seed, seed, and early stages.”
These options above just scratch the surface of support available. The key is to take the first step and courageously “share before you’re ready,” as my friends at Lessonly would say. Finding product-market fit isn’t easy, but now is a great time, and the world needs new innovation.•
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Schutt is the co-founder of Homesense Heating & Cooling and Refinery46 and a lecturer at Purdue University. Send comments to ibjedit@ibj.com.
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