Entrepreneurs Thrive in Economic Downturns

2020 has thrown us all sorts of twists and turns that no one saw coming. But from economic stress, great ideas are born. The American workforce took a hard hit during the 2008 recession, but many large and profitable businesses were created due to entrepreneurship during that economic downturn.

Researchers from The University of Missouri Truman School of Public Affairs examined data from the Global Entrepreneurship Monitor survey and found that from 2007 to 2010 the amount of necessity entrepreneurship rose from 16% to 28%.

In fact, many entrepreneurs who saw opportunities and took risks during the economic downturn ended up creating some of the most instantly recognizable brand names we know and love today, such as:

Groupon, 2008 — Entrepreneur Andrew Mason founded Groupon in the middle of the 2008 recession. During that difficult time, Groupon was able to deliver performance-based marketing solutions to connect businesses and brands with their customers.

Airbnb, 2008 — The multibillion-dollar business was born in August 2008, when tech entrepreneurs Joe Gebbia and Brian Chesky launched a simple online platform to rent out an air mattress in their apartment in high-rent San Francisco. When the Great Recession hit later that same year, suddenly the need for short-term, low-commitment living quarters exploded exponentially. By March 2009, the site had over 10,000 users and 2,500 listings, and big-name investments started flying in not long after. The rest is history.

WhatsApp, 2009 — Yahoo veterans Jan Koum and Brian Acton created encrypted messaging app WhatsApp in 2009 as a way for people around the world to message each other quickly. The app gained popularity in countries that do not have access to the same cell network capabilities as the U.S. because it can operate on Wi-Fi.

Slack, 2009 — Photo website Flickr co-founder Stewart Butterfield created Slack, a work messaging app, in 2009. Slack has experienced a huge increase in demand since the COVID-19 outbreak led more companies and businesses to send employees home, according to a March 25 tweet from Butterfield, in which he says “In some senses, we were made for this. Slack’s not specifically a ‘work from home’ tool; it’s more of a ‘create organizational agility’ tool. But an all-at-once transition to remote work creates a lot of demand for organizational agility.”

Uber, 2009 — Businessmen Travis Kalanick and Garrett Camp founded Uber in 2009 after they couldn’t find a taxi ride on a cold night in Paris. The rideshare giant has since expanded internationally across various platforms, including food delivery service, bike and scooter share service and temporary work staffing service.

These companies, among many others, took risks and thrived during tough times. That inspires greatness and reminds us that with every hardship comes opportunity. Entrepreneurship is about going all in and taking risks.

At their core, startups are made for the unprecedented. By nature, they are lean and agile originations as such, better poised to handle quick fire changes. Economic downturns create problems that entrepreneurs can solve. The recession brings to light a problem and a savvy entrepreneur can solve that problem. Both Airbnb and Uber were created from the 2008 economic recession. Both companies found ways to disrupt old business models by offering creative, viable and affordable alternatives to the previous status quo.

Forming a startup in an economic downturn works to an entrepreneur’s advantage in many ways. Not only are there plenty of new and unforeseen problems to solve, but you’re up against far fewer competitors. Then, when the economy does see an uptick again, investors will be hungry to find new opportunities, and those savvy entrepreneurs who have proven the necessity of their product during the lean times are ready to scale and seek investment.

For entrepreneurs who can weather the storm, a global recession doesn’t have to be a crisis, it can be an opportunity. Companies around the globe are prioritizing doing good over increasing their bottom line, and by doing so they are taking care of their customers. Building and scaling an impactful business requires a drive beyond making money. Having the passion to deliver on your company’s purpose will fuel you through the trying times.