Why to Start a Startup in a Bad Economy

Paul Graham’s essay Why to Start a Startup in a Bad Economy argues that economic conditions matter far less than founder quality.

Founder Quality Trumps Everything

“The state of the economy doesn’t matter much either way.” Success depends on “the qualities of the founders” rather than market conditions.

Technology Progresses Independently

Microsoft and Apple thrived during the 1970s recession because technological advancement continues regardless of stock markets.

Recession Advantages

Reduced competition: Fewer entrepreneurs means less crowded markets
Cheaper operations: Technology makes lean startups viable
Better positioning: Companies offering cost savings benefit during downturns
Job security paradox: Failed founders may find tech work more easily

Investor Challenges

Investors become risk-averse during downturns, contrary to rational contrarian principles. Adapt by demonstrating recession-proof models while maintaining minimal burn rates.

My Takeaway

Those who delay due to economic fears make the same mistake as bubble-era entrepreneurs who assumed easy riches. Act on good ideas quickly.