WSJ: The best companies are started during a downturn

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by
Steven Carlson
  on  June 25, 2009
  in  Business innovation, Current events and Hungary
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The other day I was talking to an old friend of mine who runs one of Budapest’s largest and well-known commercial real estate companies. He told me in confidence that his business is down 80% this year. Yikes!

It seems everywhere in the business world, today, you see pain and misery. And yet, what we’ve discovered at Howdy Group is that a recession is also a wonderful time to build partnerships. When two or more parties direct their resources and energies toward a common goal, the result is MUCH more powerful. The general reaction this year is shock, pessimism and retreat. That means this is EXACTLY the right time to build, partner, grow and prepare for the eventual recovery.

Case in point: this morning I read in the Wall Street Journal that over half the companies on the 2009 Fortune 500 list were started during a recession. This finding emerged from a study (PDF) just released by the Ewing Marion Kauffman Foundation. “Despite the pain of the current recession, there is reason for hope,” the study concludes, “good things do grow out of recessions.”

The same WSJ article also mentions Prezi, a Hungarian start up I have previously written about. Actually, the WSJ links to an article at Harvard Business Publishing which calls Prezi as “the best business model in the world.” The author is Umair Haque, director of Havas Media Lab. Check this quote:

If I was on the corp dev team at Google, I might think hard about whether Prezi is the Powerpoint-killer that will be the final nail in Microsoft’s cash-lined coffin.

This is a Budapest startup. We’re all in this recession together. My question to you, gentle reader. Are you thinking big enough?

  • No doubt what worked in the past does not assure future results, just like those mutual fund disclaimers.

    In tough times many find an unmanageable environment. Here is where the rules can be broken and new rules made and this is when the next breed find and make the next group of market and business leaders: survival of the fittest.

    The customer gains the most when uncompetitive companies fall.

    Thanks for the article and the insight Steve
  • Great post Steve. I tend to agree with your comments. I also believe that a recession is a wonderful time to build partnerships, but then again, this seems to be an idea that not everyone in Europe subscribes to.

    Take into consideration the UK for example. I recently gave a presentation at the Startup Overseas Conference in London where my bit was "Can you afford not to do business in Europe?" Even though the UK is in the worst recession it has experienced in 60 years and that the UK Chancellor has predicted flat or negative GDP growth next year, nearly all the SME & Startups I spoke to in 2 days were averse to the idea of trying to expand "abroad" into Europe via or with partners.

    I agree with your statement that "this is EXACTLY the right time to build, partner, grow and prepare for the eventual recovery." Partnering provides strength, combines resources, reduces costs, shares profits and a multitude of other benefits in tough economic times. We actively search for just such like-minded companies to do busines with. Great post Steve.
  • The one caveat to all this is that during a recession cash is king, and capital is especially risk adverse. Here in Hungary, we're particularly lucky that the Jeremie program kicks in next year, in the first quarter. A lot of us are looking for opportunities just now. Let's talk soon on Skype!
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