recession

Startup Boom vs. Economic Bomb

By Mark Evans in Startups No Comments Tags: , , ,

Update: Ottawa-based Shopify announced today it has raised $15-million in series B funding from Bessemer, FirstMark, Felicis, and Georgian. 

There is fascinating and potentially troubling dichotomy happening within the Canadian and U.S. startup landscape these days.

On one hand, there has been a flurry of small, medium and large startup investments. DropBox and Twitter have raised major rounds, while Tumblr, which has no real business model yet, score itself $85-million. North of the border, we’ve seen a deals unveiled on a regular basis – GoInstant, Paymentus, Wave Account, Achievers.com, SavHome, gShift, Guardly, etc.

It’s encouraging to see so many startups getting financed but, at the same time, it is difficult not to be somewhat uneasy about the uncertain economic climate, particularly the possibility that we’re heading into another recession.

On one, it is a positive to see companies getting the financing to develop an idea or business, and the capital will take them through an economic downturn. That said, a recession will impact spending so it could impair the ability of these startups to make revenue.

As much as it is an exciting startup marketplace, it is difficult not to see dark clouds on the horizon that could ruin the party.

Fred Wilson has had some sobering food for thought in a blog post called “What We Are Seeing” for Business Insider. While he sees the high number of startups raising money as a good thing, he said inbound leads are coming from everywhere:

“It is not just coming from entrepreneurs. It is coming from angels, seed investors, VCs, lawyers, accountants, friends, aunts, uncles, you name it. I’m waiting for the guy who sits at the front desk in our building to pass me a business plan on my way into the office.”

This statement reminds me of living in Hong Kong during the early-1990s during a tremendous stock market boom. In hindsight, you know the market was about to crash when the first thing taxi drivers wanted to talk about was investment idea.

For startups able to raise capital, I would advise to operate as smartly as efficiently as they can while still being focused on seizing the opportunity in front of them. Times may get rough economically but if a startup can manage its cash and resources in the right way, it has a good shot of coming the other side of an economic downturn while some competitors fail to make it.

For any startup with money on the table, I’d take it as long as the terms were acceptable because it will give you ammunition to grow and, if need be, survive.

The Recession: A Victory for Canadian Startups

By Mark Evans in Venture Capital 2 Comments Tags: , , , ,

While the economic recession has been tough on many people, it has arguably been a good thing for Canadian start-ups.

What? Yup, bad times = good times for Canadian start-ups.

Here’s why: One of the realities of the recession has been that many companies have slashed their workforces to control costs. Many of these employees are smart, productive and talented but were turfed because corporate survival became paramount. These people are developers, programmers, designers, business analysts, communicators, marketers, salespeople and accountants.

With dim job prospects, many of these people started to take on project, contract and freelance work. The rates they have been charging are relatively modest given it’s been more important to get work than squeeze out every last penny from clients. In the process, these people have discovered they like being their own boss rather than working for someone else. The lifestyle freedom, flexibility and, as important, new professional challenges have proved to a good thing.

At the same time, customers are happy because they’re getting work from skilled and enthusiastic suppliers at lower costs than hiring a full-time employee or hiring a full-service agency. As a result, it’s been a win-win scenario for everyone involved.

So, what does this mean for Canadian startups?

Already forced to operate lean and mean because there’s a dearth of venture capital around (although that appears to be changing), Canadian start-ups have been able to tap into modestly-priced talent to get things done – anything from user-interface , design, development, marketing, financial services and sales work.

In the midst of the recession, start-ups have been able to get a lot of done without spending a lot of money. It may be a difficult economic landscape but start-ups are working to take advantage of it.

The big question is what happens when the economy starts to recover? What happens to many people who start getting full-time jobs again? Will this talent pool start to disappear? Will prices for freelance, contract and project assignment start to increase? Will start-ups stop enjoying a “Recession Dividend”?

The answer is probably but perhaps not to extent that you might think. Some people who have been forced to do their own thing may not want to head back to the cubicle farm, and will continue to offer great service at reasonable rates. Meanwhile, some companies that have received received bang-for-the-buck from freelancers and contractors may start to think there’s no reason to pay higher rates so they will continue to stay away from hiring full-time or using a full-service agency.

As we start to head out of the recession, there are encouraging signs that Canadian start-ups have weathered the storm and that smooth waters are on the horizon. With access to modestly-priced talent and an encouraging number of new seeds fund being created, the Canadian start-up landscape may be poised for good times.

What do you think? Have start-ups been able to capitalize on the recession? Will they continue to benefit when the economy bounces back?

The Recession’s Over….I Think

By Mark Evans in Advertising/Marketing 3 Comments Tags: , , ,

It goes without saying that things have been pretty grim economically over the past year – millions of people have been laid off or restructured, while consumer spending has plummeted as people decide to hold off purchases after a decade-long shopping spree.

But there appears to be a few signs the recession is starting to disappear.

One indication is the re-emergence of demo opportunities. Over the past few months, I’ve been lucky to have been given the opportunity to evaluate a lot of new products and services. Some of this activity may have to do with the fact companies and PR firms are paying more attention to bloggers, but I think it also has to do with marketing budgets being expanded after nearly disappearing for the past year.

Another sign is the return of the holiday party. Last year, most holiday parties were abruptly canceled because no one wanted to be seen as being ostentatious at a time when people were losing their jobs. The parties that happened were low-key affairs with many of the frills taken out of the mix.

Recently, however, I’ve received invitations to several holiday parties. It may be that companies are feeling more optimistic or perhaps the doom and gloom that dominated the holiday season last year no longer exists. Nevertheless, it looks like the holiday party season is alive and well.

And it may just be that these are signs the recessions is starting to go away, if ever so slowly.

What do you think?

Google’s “G” is Fired

By Mark Evans in Google 1 Comment Tags: , ,

You know the economy is still mired in recession when a cash-machine such as Google decides to lay off the capital “G”, which was likely making more money than the lower-case “g”.

Apparently, “G” took the news hard, feeling a combination of glum, guilty and god-awful. The other “g” is giddy and gleeful about still having a job.


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