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It’s been a rough year for entrepreneurs. Funding has been tight, top-flight leaders have found it difficult to walk away from secure corporate jobs, and marketing and discretionary spending have stagnated. Economic hardship is no fun for anyone, but when you’re trying to build a global business from scratch, headwinds can feel like a typhoon.
If we take the long view, however, there is good reason for optimism. Historically, the most exciting and generation-defining startups have been built in challenging times. Think of Facebook, launched in 2004, in the shadow of the dotcom bust. Google also raised capital during this period and managed to grow through the widespread economic downturn. Fintech companies like Square and Stripe were founded in the wake of the 2008 subprime crisis, which eroded confidence in mainstream finance.
Why could this be? First, different economic cycles attract different types of entrepreneurs. When the money is hot, investors meet plenty of “momentum” founders: people who ride the wave, and can easily find another job if things don’t work out. But the entrepreneurs who built companies after the recession are a different group. They usually have a meaningful vision of what they’re going to experience, no matter what, and they tend to pursue it relentlessly. With fewer job openings, they—and their employees—will naturally be more connected to the company’s success. This kind of dedication filters down to those who can execute relentlessly and generates companies that are better prepared to take advantage of opportunities when economic conditions improve.
Another advantage of starting a business in a recession is the lack of competition. In boom markets, there can be a dozen other businesses trying to compete with you in almost any field. But during a recession, there will be fewer people trying to cut back on the action. This leaves room open for motivated entrepreneurs to gain first-mover advantage and claim the market.
After all, even companies built after the crash find it easier to get the talent they need. When the business cycle is up and down, attracting and retaining the right people to help you grow is a founder’s number-one headache. Talented workers are flooded with opportunities and often tend to jump between companies. But as less well-capitalized companies compete for talent, you may have a better chance of making the right executive hire.
These reasons show why, in 2023, we can expect the launch of the most transformative companies of the next decade. The kind of business that will flourish will be a direct response to the many crises that have affected us in the past few years: Covid, the war in Ukraine, record temperatures and wildfires due to climate disruption.
For example, due to pandemics and pressures on healthcare systems worldwide, companies seeking opportunities in healthcare and pharma are expected to increase. This will include AI-driven medical technologies that tackle systemic problems in national health care systems and use of mRNA vaccines to tackle other diseases such as malaria and diabetes.
Another major trend concerns climate and environment. Many entrepreneurs today are gearing up to address environmental issues and second-order consequences, targeting sectors such as energy, transportation, manufacturing, and finance, among others. Rising geopolitical tensions from China to Ukraine have also brought to the fore issues of security, autonomy and stability. This new geopolitical environment will result in opportunities for new companies in strategic sectors such as defense, hardware, cyber security, energy and food.
In 2023, businesses facing enormous challenges facing society may not begin to look like world-beating companies. They must be scrappy, resourceful and lean. But you can be sure, in a decade’s time, they will be the name on everyone’s lips.
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