Entrepreneurs Should Love a Recession

Last Updated Aug 29, 2008 12:23 PM EDT

When is the best time to launch a new venture? Must be when the economy is growing and the venture capital is flowing, right?

Um, not so much. According to Gregg Vanourek, a founding partner of New Mountain Ventures, many of the best companies are born in times of economic malaise.

"Many people assume that entrepreneurs are allergic to recessions," he writes on Harvard Business Publishing. "It turns out that downturns can be times of tremendous opportunity -- and, yes, profit -- for entrepreneurs. But only if they play their cards right."
One reason: Less competition. Many other entrepreneurs will be scared off by economic dark clouds, meaning that when you jump in you'll receive more attention from potential funders and customers.

A downturn also saps the energy of established competitors. While they are hunkering down, you'll be gearing up for a run at them under the radar.

So if you are thinking of starting a new business, you might consider the slowing economy a competitive advantage.

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.