The bright side of 2008-2009

I hate economic downturns. There is nothing fun about opening the TV and seeing commercials about "manage your money wisely", "managing your debt", "saving extra". In our business, this also requires caution. In the past 2 months I have seen a number of articles about the need to cut down, reduce, and save. (Check this one by Izhar Shay In Hebrew).

But not everything needs to be dark and depressing. Here are some thoughts about the positive side of a down turn:

1. Higher quality deals: In harder times, many wannabe entrepreneurs pass on their desire to start a venture. The only startups are created by the die-hard innovators, people that can't help starting their new company. This usually means higher quality deal flow with less noise.
2. Lower Prices: Valuation is never a reason for not doing a deal. Saying that, the current economy may push prices down, which is a nice bonus.
3. Less Competition: As less startups are funded, the ones that do start see more of a "blue ocean".
4. Downturn? Why now?: Actually, if we see the positive side of the down turn, we can now feel good in any scenario. Worst case, the economy will recover fast, and the good times will continue.

Be careful what you wish for. We may still have expensive deals in 2009.

Comments

[Zack]

Nice writeup. To keep things rather accurate, I would add that at tough times not only Entrepreneurs are sorted, investors are divided just as well. Given the time required to build a sustainable business, investing in “tough times” can yield better returns for investors and Entrepreneurs as the market recover. Noteable examples are Skype, Blogger, Google and a bunch of others. So it seems to me that it works better both ways, the real Entrepreneurs and the real investors gather in tough times. W'll see how 2010/2011/1012 will look like...