This is an Tough year for entrepreneurs. Money has been tight, top leaders have been harder to poach from stable corporate jobs, and marketing and discretionary spending have been stagnant. A tight economy is never a good thing for anyone, but when you’re trying to build a global business from the ground up, headwinds can be like typhoons.
Still, if we take the long view, there are good reasons to be optimistic. Historically, the most exciting and generation-defining startups have been built during challenging times. Consider Facebook, launched in 2004 in the shadow of the dot-com bust. Google also raised capital during this period and managed to grow amid a broader economic slowdown. Fintech companies such as Square and Stripe were founded in the aftermath of the 2008 subprime crisis, which eroded confidence in mainstream finance.
Why is this happening? First, different business cycles attract different types of entrepreneurs. When money is hot, investors encounter a lot of “driven” founders: they ride the waves, and if things don’t go their way, they can easily find another job. But entrepreneurs who start companies after a downturn are different. They usually have a meaningful vision that will come true no matter what, and they tend to pursue it relentlessly. With fewer job opportunities to fall back on, they and their employees naturally place more emphasis on the company’s success. This dedication screens out those who can execute relentlessly and produces companies that are poised to take better advantage of opportunities when economic conditions improve.
A second benefit of starting a business in a downturn is the lack of competition. In a bull market, there may be a dozen other businesses trying to outdo you in almost any area. But during a recession, there will be fewer and fewer people trying to get a piece of the action. This leaves ample scope for aggressive entrepreneurs to seize the first-mover advantage and capture the market.
Finally, companies created after the crash also found it easier to find the talent they needed. Attracting and retaining the right people to help you grow is often the number one headache for founders when the business cycle is in an upturn. Talented employees abound with opportunities and tend to jump between companies more frequently. But with fewer well-capitalized companies vying for talent, you may have a better chance of finding the right executive.
These are the reasons why we can expect the launch of some of the most transformative companies of the next decade in 2023. The types of businesses that will thrive will be direct responses to the many crises that have affected us over the past few years: Covid, the war in Ukraine, record temperatures and wildfires caused by climate breakdown.
For example, more companies are expected to seize opportunities in the healthcare and pharmaceutical sectors due to the global pandemic and the strain on healthcare systems. These will include AI medical technologies that address systemic problems in the nation’s healthcare system, and the use of mRNA vaccines to tackle other diseases such as malaria and diabetes.
Another major trend concerns climate and the environment. Today, many entrepreneurs are preparing to confront environmental concerns and secondary consequences head-on, targeting industries such as energy, transportation, manufacturing and finance. Escalating geopolitical tensions from China to Ukraine have also brought to the fore issues of security, autonomy and stability. This new geopolitical environment will bring opportunities for new companies in strategic sectors such as defense, hardware, cybersecurity, energy and food.
By 2023, businesses that tackle society’s grand challenges may not start out looking like world-class companies. They must be scrappy, resourceful and capable. But one thing is for sure, in ten years time they will be names on everyone’s lips.