Health & Science
06 Dec, 2020
Why 2021 Could Be the Best Year For You to Start a Company
In the world of startups, there is no guaranteed formula for success, but you need at least four ingredients to avoid failure: a good idea, an outstanding team, enough funding, and a way to find customers.
Great ideas usually either solve a real, significant problem or make life considerably easier. Think of great startup ideas as painkillers: People need them and are willing to pay. The year 2021 will produce a whole range of “painkiller-category” problems that will translate into entrepreneurial opportunities.
Problems create opportunities, and 2021 is not lacking in problems. It’s no coincidence that companies like Uber or Airbnb were founded and thrived after the last financial crisis. They solved real problems (“I need extra cash”) and made life easier (“I want a cheaper, easier option”) at the right time.
Hiring During A Recession
Today, the pandemic has forced millions of qualified, hard-working employees to be let go by their firms. Some of them — maybe you among them — will take matters in their own hands and create a startup. Others will be thrilled to be working for one.
In 2021 it will get much easier to compete for talent and retain employees. Perks like free kombucha, Disneyland furniture, and daily yoga classes at work suddenly sound so “2019” now. This year, offer meaningful work with good pay and possibly some stock options and people will gladly assemble their own Ikea furniture to work for you. Add to that the possibility of worldwide recruiting, which the work-from-home explosion has accelerated, and your inbox will be overflowing with applications.
Now you might be thinking, “This sounds all well and good, but it will be impossible to raise any money in 2021.”
venture capitalists and angel investors are still here and still have money to invest. It will undoubtedly become harder to raise funds in 2021 compared to 2019. The 2021 funding environment will favor outstanding founders. They will still raise rounds, and the mediocre startups will suffer. But who wants to be mediocre anyways?
Let’s consider a temporary shortage of capital a good thing. Less funding means the quality of entrepreneurship will rise again. Fewer dollars will force everyone to work harder and get better. In my first two years after starting up, I would think three times before spending a dime. For example, we would never pay for any sales leads datasets but instead hack together a script to scrape such data from public sites for free. This instilled a culture of frugality that lasted much longer than the actual bootstrapping phase.
In normal times, nobody needs a $50 million Series A round six months after starting their company. A lot of such rounds led to premature scaling and created more damage than value. Potentially good companies like WeWork, blitzscaled, straight into trouble.
Use the temporary shortage of capital to your advantage and foster a culture of frugality and wits. No business-class flights or $1,000 office chairs. The leaner you operate, the better.
Take advantage of the low advertising prices as well. If you truly offer something that people need, now is the best time to attract users cheaply. With marketing budgets cut down to almost zero in a lot of cases, you’ll be able to buy low-priced ad inventory, especially in digital channels.