The Next Google

So you have the next big idea. You think you can create the next Google or Microsoft. The only problem, the economy is in a recession. What do you do then? Forget the idea of starting a new business. A difficult decision if you think that your business plan is feasible. Wait for the economy to recover. However, by then there is a chance that your big idea is not so big anymore or someone else has already started a business on similar lines. In this article, we will try to highlight the problems faced by startups during recessionary times and give possible solutions.

What Are The Problems You Face?

The first big problem, is the recession a good time to start your business? The next big problem is money. Where do you get the funding to start your business? Unless you are a serial entrepreneur, who has already millions from previous ventures, the biggest problem you face is funding your business. The problem of funding is solved if you have your own funds that are sufficient to start the business. However, do you want to risk all your savings to start your business? Maybe, if you are convinced that your idea is good. But most of the times this is not the case. Funding a new business is difficult even in the best of times; a recession makes it even more difficult. A lot of businesses in the US are funded by mortgage financing. You borrow from a bank and keep your equity in the house as collateral. But this is not possible in a recession, especially if the recession has been triggered by a collapse in the housing market. So what do you do?

Solutions

What is the solution to the first problem? Go ahead, if you are convinced that your business is recession proof. However, if you think it is not, wait for the economy to recover. Do not let a great idea fail because of wrong timing. For the second problem, the solution is to look at other options. Venture Capitalists are a good place to start. But remember, venture capitalists only invest in 1% of all business plans they receive. Also, they invest only in businesses that require funding in excess of $5 million generally. So if you do not require that much funding, look to angel investors. Angel investors are generally high net worth individuals that invest in start ups in return for equity. Angel investors also often invest in businesses they have knowledge about, which is gained through prior experience in working in the similar industry. So they can also guide you in making important decisions that may have an impact on your business. You can find angel investors through the internet or contacts. Angel investors generally form a network. In the end, if nothing works out, look for funding from family and friends.

The US Is the Best Place for Entrepreneurs

The US has always encouraged entrepreneurs. There are specific laws such as the bankruptcy law that have been created for people to take the plunge and start a new venture. In the US, half of the working population is employed by small businesses. In the current recession, the government has taken measures to make sure funding for small business does not dry up. Even the other day, the Obama administration announced that it has added to its efforts by offering bailout for small community banks, so they can boost their lending to small businesses. Remember, the likes of Microsoft, FedEx Corp., and GE were started in times of recession.