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May 30, 2011

Why A Developing Economy is Great For Startups

I recently came across a clip on CNN called "How he made $70 million by age 24". I couldn't resist the curiosity to find out what Nat Turner, co-founder of invitemedia, had done to make so much money so quickly.

Normally I tend to ignore these stories because they're all pretty much summed up in one sentence, "I worked extremely hard and I got very lucky." But something he said during the interview really made sense and is something I have always believed: "The best time to start a new company is when no one else is."

This one little sentence is something that many of us may struggle with. Timing is everything when you're trying to start your company. Trying to stand out in an overly saturated environment of startups is unnecessarily difficult. 

I get the temptation when you hear about companies making ridiculous amounts of money when the economy is booming. It's hard not to want to get in on the action! But if you can resist the urge, you can easily improve your odds of success.

The easiest way to weed out your competition is to start a company during bad economic times. It may sound counter-intuitive, but try to come to grips with this logic. Investors and bankers alike are stingy with their money, so early funding stages are even harder to come by. 

That one reason alone is a major deterrent for less confident entrepreneurs to launch their companies and presents a prime opportunity for you to take advantage of an unfortunate environment.

Another side benefit of this approach is that it proves your product's quality. If you survive a bad economy where money is scarce, imagine the boom you'll get once things start picking up. People want quality, and your product's quality will shine in tough times.

Taking advantage of the unemployment situation is always a big plus. There are a lot of laid off people from companies due to cutbacks or collapses. This leads to a great pool of talented hard workers ready to get back in the game. If you're lucky, you can hire at salaries beneficial to a startup's budget.

Starting a company is no small feat, but there are far more positives doing so during bad economic times. Startups are always a calculated risk, but why not better your chances just by waiting for the right time? It sounds simple enough to me!

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