511: Starting a Startup During COVID-19?
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In today’s episode of The Startup Chat, Steli and Hiten talk about starting a Startup during the COVID-19 pandemic.
During the COVID pandemic, there’s going to be a lot of people thinking about starting a new Startup. However, whether now is a good time or now to start is a question that needs to be answered.
In this episode, Steli and Hiten talk about if this is the right time to start a Startup, why there’s never a good or bad time to start, what to consider if you’re starting something right now and much more.
Time Stamped Show Notes:
00:00 About the topic of today’s episode
00:23 Why this topic was chosen.
01:37 If this is the right time to start a Startup.
02:22 Why there’s never a good or bad time to start.
02:34 How the world is very different right now.
04:38 Why this is a good time to start.
07:44 What to do differently if you started now.
09:05 Why cash flow is more important right now.
10:16 Why “nice to haves” are off the table.
11:57 What to consider if you’re starting something right now.
3 Key Points:
- I don’t think there’s ever a good or bad time to start a Startup.
- The world is different.
- There’s more access to information right now than in 2008.
Steli Efti: Hey everybody. This is Steli Efti.
Hiten Shah: And this is Hiten Shah.
Steli Efti: And today on The Startup Chat we’re going to talk about starting a startup during COVID-19. Basically the idea, if we have to start a new company or a startup right now, no co-founders yet, no money, no product. Would we do it? Would we think that, with what we know about entrepreneurship, would we think that this is a good time or would we want to wait until whenever the economy’s better? And if we thought that now is a good time to start something, how would we go about it? How would we think about it? Is there anything different about starting a startup right now during this kind of special time in history around the world? Would we approach in any way differently than we usually would? I thought that it’d be a fun topic to talk about. It probably is going to have a few golden nuggets for people. So let’s get the first question out of the way because I think that’s going to be an easy one. You never know, especially with when you talk to Hiten Shah, but is this a good time to start a startup or a bad time to start a startup? What’s your reaction to that if I asked you, “Hiten, I have entrepreneurial ambitions, but I wonder if this is the right time for me to start something.”
Hiten Shah: Yeah, great question. It’s just a great question because the circumstances, like this has happened before, right? So there’s like the 2000s, and this is particularly in tech, so there’s the 2000s and there’s like the 2008 kind of housing bubble thing. And then I think the next one was right now. And these are all times when people are like, “Should I start something? Should I not?” People start talking about it. The one thing that like fascinating to me with this question as I think about it right now is, first I don’t think there’s ever a good time or a bad time. So I think it’s false to think it’s good or bad. But for some reason it comes to people’s minds when the world is going to shit and they’re like, “Oh, is this a good time?” It’s never a good time. Is this a bad time? Well, it’s never a bad time. I think it’s like whatever time works for you. Meaning whatever it comes to mind or whatever circumstances dictate that you have to find other options in whatever you were doing, like you’re laid off. So that’s where I’ll start. But I think there’s a big thing that I haven’t thought about till now that really hit me right now, which is, the world is different. Every one of those times, the world was different. You’re talking about like 2000, then eight years later, and now 12 years later, and we’re like 20 years from 2000, which many of us weren’t actually working at the time. I was in college at the time. I was definitely working, but I was in college, I wasn’t in the market, so to speak. And it’s something that I feel like there’s more access today to information than in 2008. Definitely than in 2000. There’s more information. There’s more people on the internet. There’s all these factors that were different every one of those three times. And this time in particular, anyone who wants to start something, especially in the last five years, I would have just told them, “Yeah, just do it.” You want to do it, just do it, give it a shot. Your chances are better than ever. So I don’t really believe there’s a good time or a bad time.At the same time more people on the internet, more access to information, more communities that are online that can help you. More than more communities, there’s like a ton of things that you can do to help you get started if you want. And quite frankly, like the gig economy and freelancing and side gigs and hustles and this and that, it’s a thing now. We didn’t talk about that in 2008, we didn’t have those things. Now we do. And so there’s a lot more systematic sort of ways or structures in place actually support you if you’re starting now versus ever before in the past. So why not?
Steli Efti: Yeah. I’ll come out and I’ll say, of course, like for anybody that’s been a long time listener of The Startup Chat.] You know that one of our core mantras is, it fucking depends. I mean, it depends, but I’ll come out and say this is as good as a time as it’s ever been. Number one, I think that the world is changing and change is, I think, better for the new that can adapt or that can serve the change or help with the change, than for the old. For the old change is always a threat, and for the new it’s an opportunity. Secondly, I think opportunity cost is going to be lower for many, not everybody of course, because if you are healthy and if you are ambitious, and you have a couple of skills and you want to accomplish something, the amount of stable, secure jobs that are going to be out there right now for you, where you know I’m going to go and work there and I’m going to have a great career and there’s no chance they’re going to lay me off and there’s plenty of high paying salary gigs that I can choose from. I guess, my best guess is that, that is going to be less available in the world in the next two years than it was in the past two years. So if there’s less stable corporate career paths available, then the entrepreneurial path is less of an opportunity risk. It’s less risky in general because the corporate job is not as stable in an unstable world as it is in a stable world. So I think that this is probably a particularly good time. And for all the other reasons as well, there’s just more information, more money online to be made. You can find a it’s small audience and make a good living much easier today than you could in 2008. Finding a niche audience in 2008 was still quite hard versus going for serving kind of a broader mass that was already online and comfortable with paying for services and content and whatever. So I think there’s a lot of opportunity today to start something, and I also think the opportunity cost of starting something is low because there’s just not that many stable jobs in companies that you would think there’s no way this corporation is going to go out of business or be in trouble or lay off people in the next two years. There’s just less of that available. So I think it’s a particularly good time. Now let’s ask the question, if you and I, individually, started a startup today with what we know, would we do anything different? We’ve given a million and one piece of advice on how to start a startup, how to get your first 10 customers, how to get your first a hundred customers, how to do marketing, how to do product development, MVP, everything. Like whatever question a listener has that’s kind of new to the world of entrepreneurship, you just type into Google thestartupchat.com and then that word, and you’ll find an episode where we talk about it or give advice. But I think the interesting question is, would you do anything differently if you started a new startup today than you would have done over the past five or 10 years? Is there anything that you would be like, because the world is changing, I would approach it slightly differently? Or I would be paying more attention to X, Y, or Z, or thinking about it differently in some way?
Hiten Shah: Yeah. That it depends thing comes up, because it really depends on your own circumstance and your availability. Right now it’s interesting. I think the difference right now from the past couple of times that everything’s gone to shit, there’s more uncertainty this time than the last two.
Steli Efti: Yeah.
Hiten Shah: And that, I think, would make me want to be a lot more conservative about spending my own money if I have any to spend. That’s probably the number one thing that comes to mind for me, which is like, you’re your own sort of savings, typically you dip into your savings in order to do something on your own, whether it’s for living expenses or even actual expenses for the thing you’re starting. I think I’d narrow my options more so that the amount of my savings I dipped into right now, where it was a lot more limited than in the past. And the only caveat I’d give is, if you somehow have an ability to make sort of money by getting a job really quickly, because for some reason that’s just a available to you right now, maybe I’d think differently about that advice. But otherwise I think being more conservative with your own savings might be a good idea right now.
Steli Efti: Yeah. I would totally agree. I think that if I started something right now, I would care a lot more about cashflow, doing something that can generate revenue fast. And I’m already, I think we’re both already, on the cashflow always, but even more so now than ever before. I wouldn’t want to build anything that would take like a year of building up to start monetizing or anything like that. In general, I would try to start something very small that can get on the road very quickly, iterate, generate little bit of money and then build on that versus building anything that’s more complicated, more resource intense, anything that I know will have to a need venture funding or other funding. During this time, I think the clarifying thing right now is that anything that’s a playful nice to have is just off the table. Whenever there’s like an economic downturn, whenever there’s like really, really hard times or really high uncertainty in the market, I think it wipes the slate clean from products and services that are nice to haves where when there’s great wealth, maybe there are niches for people to play around with new things and to be a bit, quote unquote, a bit wasteful. But when it’s hard times, people will set a much higher bar to the question, do I really want to spend money right now for this? How valuable is it to me? And so I think that this would be even more so the time to ask yourself, is this an absolute painkiller that I’m trying to build? Are there people willing to pay for this today? Not when the world gets better, not when budgets are unfrozen. Are their budgets in the world, are there people in the world that are willing and need to buy the type of thing I’m thinking about building today? Right now, with this uncertainty? But I think cash is king would be even more important. Scrappy. I agree, I wouldn’t want to say I’m going to live off my savings for a year, and by then, hopefully, this new venture of mine is making money. But I’d rather probably think about the what can I do that is pointing to the direction of what I want to build that could generate some cashflow right away in the first month, in the second month? And then build on that. And maybe once it has enough momentum and proof, I go all in on this. But cashflow, I think, would be a huge one. And then being certain that this is something, and I think cashflow is a good indicator for that. If you wanted to build something today and you did customer development and everybody was telling you, “You know what? Six months ago I would have bought this. This is absolutely fantastic idea. It’s just that right now, we wouldn’t want to buy this. But once the market relaxes and budgets get opened again, then I would be interested in this.” I don’t know if I would … I mean, I would always be skeptical about this type of feedback, but today even more so. I’d be like, “All right, this is worthless then.” There’s no sense in building this if people aren’t willing and ready to buy it today and not just in some imaginary future where everything is like it used to be. Because we don’t know when that’s going to be or if it’s ever going to be. So I think that those would definitely be kind of my hard constraints to start something right now.
Hiten Shah: Yeah. Yeah. I couldn’t agree more.
Steli Efti: Well, if you’re listening to us and you’re just starting something right now, we actually want to hear from you. We’re interested. What are you building? Why are you starting it right now? What is your plan to start making money? What is the question you have for us? We’re here to help. We want to support you. Send us an email, firstname.lastname@example.org, email@example.com. If you appreciate this episode, if you’re a fan of The Startup Chat, lots of you are and tell us that and we really appreciate you. Make sure if you haven’t done this, take just one minute if you really like the podcast, go to iTunes, give us a review, give us five stars. We appreciate that. And until next time, we’ll hear you very soon.
Hiten Shah: Thank you.