This is has been an article of faith long and extensively remarked on over many cycles: tech crashes of 83, 01, etc and financial recessions and shocks like 87, 90, 01, 07). Their list of references seem to show that this specific question hasn't been rigorously examined though, which is somewhat surprising.
Those references also show that the data are available so it's it's a shame the authors only looked at 07/08. Looks like the first author worked on this while a grad student. Perhaps they will expand it into a book.
"...we find that recession startups experience better long-term outcomes in terms of employment and sales growth (both driven by lower mortality) and future inventiveness. While funding conditions cannot explain differences in outcomes, a labor market channel can: recession startups are better able to retain their founding inventors and build productive R&D teams around them."
There is also a selection bias in the companies that do get funded, and the fact that they're coming out the door without a growth-at-all-costs culture.
I started my first startup in September 2001. We got amazing people for nothing and free office space. Post-2008, my series-A failed to produce any sales because the market was simply gone. But at least I could find and retain good engineers. I would be afraid to start a company today.
What part of today would have you worried? My start up is having a great time finding people (amid tech layoffs) and our office space is heavily discounted due to WFH/high office vacancies. Our sales are going well also (our industry has been booming). It seems to me like a good time as any to build a company.
Yeah, this feels like a great condition to start a startup, if you can raise.
Talent is the cheapest it's been certainly in at least 10 years. The rest of the economy is going okay, so customers shouldn't be impossible to get. If you want office space, that's going great.
I don't know if anyone can raise money right now, though.
The title made me think this was going to be about speculating the optimal time to birth a baby so they can be well positioned to create a successful startup by the time they reach full maturity.
What I took from it is that if you're a startup that got its funding during a recession (meaning there's lots of laid-off people floating around), you get to collect very talented, skilled R&D people. Hence if that's the situation for your startup you would say that being a recession start up is great.
I think that's the specific conclusion I could get from it, the paper is very heavy and there's tons of caveats because every recession is different. But yes, if you are good/lucky enough to start a start up during a recession that has reduced labor demand, then you get to pick from a very talented pool.
Currently, I'm not sure if we had a recession last year, the labor market stayed strong despite the market correction and very public layoffs. I guess when everyone and their mother is calling for a recession it's just not going to happen? Yields are uninverting, historically I believe this is a strong signal of a coming recession, and the markets are calling for interest rates to start getting cut in March of next year. So I guess we'll see.
The other question that I found very interesting is: Do start ups born in a recession come to be because the idea and quality has to be very good? Or do they come to be because above-average confident people are the only ones willing to put their ideas out there? Or a combination of both?
Economists have predicted 9 out of the last 5 recessions, so the saying goes.
That being said overall market movements take a while to shake out; the mortgage bubble was first pointed out as early as 2006. People have been calling out China’s property bubble since the 2010s.
For tech at least I get the impression that the labor market out there is tough.
> For tech at least I get the impression that the labor market out there is tough.
Anedcotes of course, but what I hear is that maybe the Bay Area tech labor market is tough - but there's a lot of country that isn't the SFBA and nobody I know who isn't bent on working for a FAANG is having trouble finding work.
From my perspective (working in Europe) this year has been exceptionally tough. I'm working rn but I always keep options open, e.g. staying in contact with recruiters and looking at job postings. I'll apply for a job if it's a good fit.
Overall far fewer opportunities and salaries are down, and more stringent requirements across the board. Whereas before I would get a good response for an application - at least to the technical test or interview stage - now I just get rejections or crickets. I suspect many jobs are fake or they already have the candidate lined up. I'm not desperate so I haven't been trying especially hard, but I can imagine it's not a good time to be looking for work in a hurry.
Here in my side of the Europe, employer is having really difficult time finding any candidates for over 3 years. So last month they approved to try and hire on other countries in EU for these openings(they have presence in multiple EU nations and teams are distributed).
Infact the market is so good, that people living few blocks from the office premises(multiple locations) immediately decline once HR mentions that they need to come to office at least once every 2-3 weeks.
Then we have some junior interviews where they are asking more than what our mid and some new seniors make and 100% WFH, while most of us are in office most days(heck I mentioned in some other thread a while ago that I even commute 2h each way to/from work, cumulative 4h on office days).
I think, market is mostly volatile now and some are enjoying it while the others are suffering.
Also, let me not start the rant about now 99% of startups and SME now posts for only Senior Engineer/SWE with pay of juniors from 5 years ago or something, no wonder people won't apply.
Right, I'm not going to apply for office jobs anyway (I don't live near a tech hub, for personal reasons I can't move, there are almost no tech jobs locally, and I'm not going to spend hours commuting just to do Zoom calls from the office) and nor will I accept another pay cut -I had to take a lower-paying job earlier in the year because there were no other options.
I don't know if your company genuinely needs be office-only or you just have management who thinks they need to be office-only, but it sounds like there are applicants you are leaving on the table.
So yes, there are jobs, but not ones that I would apply for. Not being picky, but just for practical reasons. Even so, taking that into account, the job market is pretty terrible this year.
If I were overly honest, most of the employees doesn't even come to office, some I haven't seen over 3 months. However,management is pretty old people(50+), who apparently loves to be in the office for some reason.
So, in summary the "come to office" is just pleasing the management mostly. Also, most of the contractors we have can't enter the premises due to security bs, but in the end it is just all garbage when employees "need to come in every 2-3 weeks" I'd say. I on the other hand have to be in office because I need to deal with some non-smart sensitive hardware that is a bit too large and power hungry.
Speaking of pay, my employer actually pays pretty solid compared to what I hear my friends are making in similar positions to what my employer offers,but before this one, I frustratingly had to decline too many interviews because pay was insulting, I mean we need some pay disclosure upfront regulation here in EU and outright ban asking for expectations instead and then at the end stage citing fußball table and console to accept a huge paycut.
I keep telling myself that an incoming recession creates good conditions for my startup (vivoh.com). I guess I've internalized the idea that if you have a startup during a recession and can survive, you'll be in a great position at the end. We shall see.
But, I'm hedging my bets as well with side projects that would appeal to people in a recession , small purchase items that help them learn while they are looking for work: supernatural blogging tools svekyll.com and extrastatic.com. And a way to level up in Japanese by combining anki flashcards with Japanese classic books and learning kanji (community.public.do).
But, I'm concerned about this next year. Lots of people at my co-working space are saying this is the worst sales environment they have ever seen. It's anecdotal but it feels like that to me too.
This is far less an interesting question than "what startups could exist now"
My guess is this question won't return much of use, but it would return far more value than examine the "macro conditions" of failed startups (or indeed any startup condition).
Title made me think this would be about macro languages causing tech debt after providing quick wins in the early stages of a startup. I should know, we still have > 20 year old load-bearing m4 macros in our web build.
20 year old load-bearing m4 tends to be less of a technical debt than 20 year old load-bearing Java - because it keeps working and doesn’t need constant maintenance.
From the abstract: "While funding conditions cannot explain differences in outcomes, a labor market channel can: recession startups are better able to retain their founding inventors and build productive R&D teams around them."
Those references also show that the data are available so it's it's a shame the authors only looked at 07/08. Looks like the first author worked on this while a grad student. Perhaps they will expand it into a book.