Starting Up for Start-ups in 2024.

As we start of the new year and see start-up activity ramping back up from the annual CES pilgrimage, starting the pitch machine up again for founders, to setting new business forecasts for those a more financial bent.    With DocSend reporting heightened activity in the first week of Q1.2024 as VC activity up by 51.52% and Founder activity up by 22.39% in the first week of the year.  The fundraising rush may already be underway for many.

Unicorn or the Cockroach?

If you ask a group of startup founders, investors or interested parties you’ll probably garner a wide range of perspectives.   From those carrying over the experiences of 2023 with 65% declines in venture investment.   To those with a more optimistic view for 2024.  Or those who will just say the outlook for startups in 2024 is hazy.  

During these conversations, an old essay by Paul Graham of Why to Start a Startup in a Bad Economy felt very relevant again swapping in 2009 for 2024.   So hope this may spark memories by those of you who were around the last cycle or an introduction for those of you who weren’t.  

So just as investors in 1999 were tripping over one another trying to buy into lousy startups, investors in 2009 will presumably be reluctant to invest even in good ones.

You'll have to adapt to this. But that's nothing new: startups always have to adapt to the whims of investors. Ask any founder in any economy if they'd describe investors as fickle, and watch the face they make. Last year you had to be prepared to explain how your startup was viral. Next year you'll have to explain how it's recession-proof.

(Those are both good things to be. The mistake investors make is not the criteria they use but that they always tend to focus on one to the exclusion of the rest.)

Fortunately the way to make a startup recession-proof is to do exactly what you should do anyway: run it as cheaply as possible. For years I've been telling founders that the surest route to success is to be the cockroaches of the corporate world. The immediate cause of death in a startup is always running out of money. So the cheaper your company is to operate, the harder it is to kill. And fortunately it has gotten very cheap to run a startup. A recession will if anything make it cheaper still.

If nuclear winter really is here, it may be safer to be a cockroach even than to keep your job. Customers may drop off individually if they can no longer afford you, but you're not going to lose them all at once; markets don't "reduce headcount."

With the startups I work with, this mindset is very relevant today. Working to quickly achieve sustainable, profitable operations and make the most of our available resources to extend runways. 

Echoing the words of legendary Coach John Wooden of "confidence comes from being prepared."