Why a Downturn Can Separate the Recession-Proof Startups, from the ‘Hacks’

Why a Downturn Can Separate the Recession-Proof Startups, from the ‘Hacks’

What goes up must come down, according to the unavoidable laws of physics in economics, and we seem to be heading in the direction of the negative side of the equation. But there is still hope. If you need a refresher, the 2008 Great Recession saw the introduction of Venmo, Instagram, Uber, and WhatsApp. When I consider recessions, I am reminded of something an electrician said to me as he was fixing up my house during the dot-com bubble. When I asked him if he was concerned that the state of the economy might have an impact on his employment, he said, “Nah. The hackers just get weeded out in a weak economy.

If your firm is burning money and missing the essentials of good business, you could be in for a rude awakening. On the other hand, perhaps you always were. However, if your firm is well-established and founded on a sound concept, you can certainly weather any storm that comes your way. Are you developing what CEO and creator of Operator Collective Mallun Yen refers to as “painkillers,” which are fundamental components of your customer’s business? Or are you creating something less necessary—what she refers to as vitamins—instead?

Vitamins versus painkillers, Companies that produce painkillers rather than vitamins, particularly those that need complex technical development or that foresee major but not yet widespread changes in an industry, are particularly well positioned to withstand the macro conditions outside their control. Products that materially boost income or considerably reduce expenses are included in the category of painkillers, according to Yen.

According to her, those startups can fall into any category as long as they are assisting businesses in becoming more efficient, which is even more crucial in a volatile economic climate. For instance, one of the businesses we are funding allows consumers to considerably enhance their revenues by enabling them to carry out previously unheard-of tasks. Another is significantly reducing the cost of cloud infrastructure, which will become increasingly difficult for businesses to manage as more data is stored in the cloud and related queries and other analyses are required.

Despite certain short-term setbacks brought on by market changes, CapitalG managing partner Derek Zanutto predicted that many businesses will flourish and prosper in the years to come. “During times of difficult market conditions, some of the greatest firms have been formed or have grown stronger than before. I have high hopes for firms that are assisting businesses in maximizing the potential of their data. 

In the long run, data may help businesses create more revenue and control expenses, making it a recession-proof industry, according to Zanutto. Madrona Ventures managing director Soma Somasegar stated that his company has been investing in intelligent apps and that they are continuing with their goal no matter what the macroenvironment may be doing.