Start-up Nation

"Is now a good time to start a company?"

Andrew Zacharakis
Paul T. Babson
Term Chair in Entrepreneurship
Babson College
Wellesley, Mass.
"Yes, I'd start a business now. That may seem a bit contrarian, as consumer confidence and economic indicators are in decline, but other factors may outweigh those. First, there's a lot of fuel out there for the right team and opportunity. Venture capitalists continue to raise record amounts and are looking for good investments. Although VCs and angels may be reluctant to fund the novice, those that can put together a strong team and have a clear opportunity and vision should be able to find a strong investor. Second, the poor overall climate has discouraged the land grab and probably slowed the pace at which a firm needs to capture that elusive first mover's advantage. There will be less competition to be first with an innovation. And the crazy competitive moves fueled by young entrepreneurs with too much cash will be curtailed because of the lessons learned over the last couple of years."

Cliff Numark
President and CEO
San Diego Regional Technology Alliance
San Diego
"The current market environment, somewhat counterintuitively, makes this an ideal time to start a business. Demanding market conditions force entrepreneurs to know their customers, curb expenses, and develop businesses that make money. Last year's fantasyland was perpetuated by a vicious circle of the quick buck: greedy and inexperienced entrepreneurs looking for the quick million, venture capitalists looking for the quick IPO, consultants and investment banks looking for the quick big deals, day traders looking for the quick profit, and media types trumpeting the next new thing. Good companies are not built in a day."

Liz Harris
UNC Partners Inc.
"Yes, it's still a good time -- but the real key to success is a competitive strategy. Say you want to go out and buy a lot of TV stations. You may develop a company that generates revenues, but you may not have any operating profit. Instead you could decide to buy only network-affiliated stations and opt to make them the number one local-news leaders in their respective markets. That strategy would provide you with a competitive advantage, which should translate directly into profitability."

David Loeschner
Executive Vice-President
BP Microsystems Inc.
"I'd say now is not the best time to launch a company. Most every company needs other businesses or people to buy their product or ser- vices. Right now everyone seems very cautious and is putting off all but essential purchases. New companies also greatly rely on cash flow, and I know both companies and people are paying slower, so up-front capital needs would be even greater than normal."

Jenifer Rose
CEO Future
Computer Technologies Inc.
Reno, Nev.
"Depends on what type of business you're launching. Some businesses do wonderfully during recessions, and some would never survive. I strongly suggest doing a lot of market research on the effects a recession might have on the type of company you're planning to launch -- then make sure you have a plan on how to deal with those effects."

Patrick Von Bargen
Executive Director
National Commission on Entrepreneurship
Washington, D.C.
"To me, the key issue is access to financing. Certainly now is an OK time to use credit cards or any other kind of lending instrument. Interest rates were recently lowered, and they'll probably stay low for a while. But it isn't a good time to find equity financing. Venture capitalists are preoccupied with their firms' portfolio companies and are not making as many new investments. It's hard to get angel-investor money, too. Angels tend to be in a similar situation as a lot of VCs, and they follow their lead. As for friends and family, that old standby, that source also might be harder during the next six months because of the drop in the stock market. Those friends and family members are probably feeling a little less flush."

William J. "Denny" Dennis Jr.
Senior Research Fellow
National Federation of Independent Business Education Foundation
Washington, D.C.
"Mathematically, a slowing economy is a poor time to start a business. Relatively more people begin operations during such times. Meanwhile, demand weakens. Still, too much depends on individual circumstances to offer hard-and-fast rules on the advisability of start-up during an economic slowdown. While the overall chances for success may be reduced, too many businesses do too well when overall business conditions are not generally favorable to argue that starting a business in a slowing economy is not wise."

S. Michael Camp
Vice-President of Research
Kauffman Center for Entrepreneurial Leadership
Kansas City, Mo.
"The factors that make the difference are spirit and experience. Every entrepreneur comes to the game with some of both. In today's market the scales have tipped toward experience around the proven fundamentals of business. The more you have, the more likely you will be able to succeed, regardless of how strong your passion for the enterprise is. It still takes both spirit and experience to build great companies, but to survive start-up for growth ventures in today's less forgiving market, you simply have to know what you're doing."

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Published on: May 15, 2001