

Why to Start a Startup in a Bad Economy (2008) - shawndumas
http://paulgraham.com/badeconomy.html

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mathattack
My 2 cents...

What is more likely to create a company built to last? 1) A firm starved for
cash, but with boadloads of the best talent or 2) A firm starved for talent,
but with boatloads of cash

In situation 1, a great leader can create gold. In situation 2, all a leader
can do is line their pockets.

In 2002 and 2008 there were fantastic people that were unemployed through no
fault of their own. People who just aren't visible in normal times. In many
cases, these top performers already have money, so they can take a risk.
Better to invest sweat in the dark days than cash in the bright ones.

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doctoboggan
>When times get bad, hackers go to grad school. And no doubt that will happen
this time too.

I am going to graduate with a bachelor's in EE in less than a year, and had
been planning on going to grad school for CS. Is this a bad idea?

~~~
dedicated
I think what PG meant was many people go to grad school to wait out the bad
economy while it's hard to find good jobs. Is that your case, or you always
wanted to go to grad school?

The other poster said it right, consider your reasons for attending in the
first place.

The final point that PG makes is investing in your own startup. If you have a
solid team and execution skills, then by giving up on grad school and
investing your youth and energy into your startup could yield better returns
relative to "investing" later when the market is hot.

~~~
doctoboggan
I think I am going to avoid my student loans for a little longer. I would love
to work for a small startup but I feel my EE degree would be useless, and too
be honest I don't even know how to see out such employment. As my graduation
date brings the time when my loans will start accruing interest closer I feel
like my only option is to go to grad school or take an entry level engineering
position at a large firm.

I don't see how I can fit startup employment or even creation into the path I
chose 4 years ago. If only I could talk to myself 4 years ago.

~~~
jackowayed
That's absurd. I don't know how much you code or how good you are at coding,
but if that's how you feel, the solution is to start coding more. Right now.

Since you're in EE, I'm sure you have have the basics of coding down. Even if
you're kinda shaky now and don't know any of the hot stuff a lot of startups
are using (Ruby/Python/etc), you can absolutely get to the point that startups
would want you in a year of playing around on the side. Once you know the
basics of coding, it's not all that hard.

I'm not sure what the market will be like in a year, but right now everyone is
desperate for talent. You don't know how to seek out such employment? HN has a
jobs section. Almost every startup you use has a jobs link in their footer,
and they're all hiring. Check out GitHub jobs, StackOverflow jobs, 37signals
job board, etc. Get yourself a little bit of exposure via open source
contributions, blogging about technical things, Hacker News, etc. and they'll
come to you.

As for student loans, though startups pay less, they still pay pretty high
salaries, especially now when all the companies have cash and competition for
talent is insane. As long as you keep living fairly cheaply (which can still
be a couple steps up from a dorm, but may involve sharing housing, especially
if you end up somewhere expensive like the Bay Area), I'm sure you can get an
offer that would allow you to live and pay your loan payments. And then you're
actually decreasing how much you owe instead of just pushing it off.

If you really want to go to grad school, go to grad school, but if you want to
work for a startup but feel like you "can't", take steps to make sure you can.

~~~
doctoboggan
Thanks for the advice. I taught myself python this summer and am currently
learning GUI programming with pyqt. I am also learning django and
javascript/coffeescript. I recently contacted the developers of IPython to see
if I could help out anywhere and I have been reading to source of the qt-
console app they just shipped with the new IPython. My goal is to have some
meaningful contributions by the time I graduate.

So although I sounded pessimistic in my post above, I am trying to turn myself
into someone desirable to startups. But I still have the feeling it is too
little too late. Here's to hoping I am wrong though.

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jsherry
One more point to add to the "pro" column for starting a company in a down
economy: your opportunity cost is typically lower. Fewer promotions and larger
numbers of layoffs occur in large companies during the bad times.

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ditojim
we started our business in 2007 and have seemingly grown without issue despite
tough times in our economy. it wasn't intentional that we started when the
economy was going down, just a coincidence. it has worked out pretty well so
far..

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tejaswiy
I just wish people can make their minds up on if this is a tech bubble or a
recession.

~~~
RuadhanMc
Why?

In the current context talk about a recession isn't due to any sort of tech
bubble. Talk about a recession is due to issues with the financial system and
debt.

A small recession caused by a tech bubble would honestly be more desirable (in
my mind anyway) than what issues with the financial system and debt could
produce.

Also, a downturn in the tech industry now wouldn't necessarily be because of a
tech bubble, but rather due to lack of confidence in the financial system as a
whole.

~~~
tejaswiy
Agree. I was speaking in the context of funding available to startups. On the
one hand people seem to think there's way too much VC money readily available.
On the other hand, this money has to come from the financial sector and it
can't if it's a recession.

~~~
quick_look
Is it coming from the same part of the financial sector?

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nirvana
I think the point about the need to be a contrarian investor, and the fact
that contrarians are in the minority by definition is really compelling.

I'm not sure if I'm reading this into the essay, or it was intentional, but it
seems to be that a good quality for a founder is the focus on the business
they want to create should be strong enough that external factors like the
macro-economic situation become essentially background noise.

Or, maybe I'm just pig-headed!

I do always wonder, when investors talk about how important the team is, how
they judge the strength of a team. Recruiters can't judge programmers very
well, so, how does the average investor? PG has an advantage, being a
programmer himself. I'm assuming most investors are not technical people.

~~~
hvs
When PG is talking about the strength of the team, he's not just talking about
programming. He's talking about business skills, technical skills,
personality, the whole package. Technology is only one small part of what
makes a company successful.

~~~
felipemnoa
And most importantly, perseverance.

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belligerent
Already?

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petegrif
Paul Graham is the man. So many great posts.

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badusername
Ha! Seems like HN has already pronounced the current economy a doozy.

