Vijay Anand | The Startup Guy.

The Economy: The Case for Startups.

Posted on: March 18, 2008

When I was in Canada, I lived through two cycles of economic downturns. If you are gasping for breathe and feeling sorry for me already, well dont. Markets fluctuate and correct themselves much more rapidly in more mature ecosystems. We are just getting used to it and we better. It’s going to become part of life as we move on – should things turn out for the best.

The first downturn that I saw in Canada was right after the dotcom bust. That was when I went to Canada. One day it was all merry making, drinking and having fun, and the next week, all the new construction that was coming up on “March road”, which was known for his cluster of hi-tech companies, simply was uncovered with inactivity. Nortel, which was and still is the royal diadem of pride in the region and for the country used to have close to four or five campuses – maybe more – and each of their offices were huge. Their headquarters in Carling avenue was pretty much a glass dome building, and it still shines quite beautifully during the night – perhaps now with the splendor that once was.

When the first bust did happen, the first thing that most companies did was shut down their research facilities which were on long term evolution strategies – essentially the teams that were working on the next big thing lost their jobs. While most of the others felt sorry for these guys and were empathizing for these fellas, little did they know that in a couple of months following that, thousands would get laid off and no one would flinch even hearing the news – it had become everyday affair.

The interesting thing to note was that almost everyone who got laid off from their research work setup shops, or joined a small firm. Within a month there was barely anyone out of the first wave who was still unemployed. If you asked them what their new company was doing, they would all nod and say its still under thought and planning – exactly what we mean by a “stealth-mode” startup these days. Most of them, we all knew, were working on optic fibre and wireless stuff – because we all knew what the core expertise of these guys were. It was quite obvious that they weren’t going to hire artists to do masonry work.

Fast forward three+ years, and Ottawa is a thriving centre for wireless and telecom activity with a bustle of activity going on there. Mitel, I am told, was one of the first companies that came out of Nortel’s engineering team. The second bust (which i witnessed) spawned lots more of them. Not all of them survive, but most of them are doing pretty fabulous work.

Now what’s the correlation, you might ask.

Well, Let me draw a parallel. Remember the time that a team of amazing folks walked out of Wipro and started a company? You could consider that as the same as Mitel coming out of Nortel. When, and if the economy does slowdown in the US and hit us, even slightly, it will cause a spillover which will turn this place into a haven for startups.

All of a sudden the high quality management staff that only big corporates could hire, talent that never even considered startups as an option, PR firms which were too swamped to cater to the SME market, surviving corporates which need an edge to break free into the void, would all be available to work with a prospective startup or SME and grow it into the next big thing, and soon you have hoards of new high calibre companies popping all over the place. In very cinematic terms, startups essentially become the seabiscuits of the game. All that said, cash will once again rule over the industry to be the final word in every deal, and what Alok Mittal writes about becomes very crucial to become practicality. People who were once used to flying in business class and have tasted the spark of life and luxury, simply can’t stop till they regain that status again. And Ambition, drive and passion are all good traits to bet on.

I’ve always imagined the economy to be this lone tower which keeps growing and growing and everyone around them wants a piece of that growth that they feed it everything, and eventually the tower crumbles a bit because of the weight, and as it crumbles, spawns off new seeds around it. The cycle goes on and on. There are ripples caused all around, waves rise and fall, and the cycle repeats all over again.

If you really think about it there are only two kinds of folks in the economy: The creators and the capitalists. So if you look at it from that perspective, what applies to entrepreneurs also applies to artists. If you apply the scenario to the case of music, there probably once was a genre of music which grew in demand and possibly was “the” in-thing, eventually crumbled into a million other variations and the cycle goes on and on. It’s all part of the progressive path.

If you really want to get spiritual about it, isn’t destruction itself the first stage in creation?

I am also realizing lately that once your company does grow to a point where it is a new peak and much taller than most other companies around you, ensuring that it still does stay tall by expanding its base is probably the toughest part. I can only imagine the stress and pressure that must be on the senior management of companies such as cocacola to keep the momentum going. I can surely understand why their current CEO Neville is quite thrilled to have the company breaking even and profitable again.

But coming back to the topic, So… why am I having a grin when I hear news about the economy? Because it means change is in the air, and its good for the startups. Absolutely!

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8 Responses to "The Economy: The Case for Startups."

Vijay,

I loved the article for its narration style and correlation of events, and simple way to explain the economy all that !! Yesterday after a long time of calls and email exchanges I happened to meet your singapore friend Vijay !! Hope you remember that we spoke abt making Proto global and it was the centre of discussion yesterday too. We would like to hear from you on the same, as we are eager to execute it here with YOUR TEAM – Wat say ?

Am at a loss for words now that i’ve read this post.. simply amazing on how you can think so broad and relate to simple things which other miss…

Keep enlightening us like this….

That’s the greatest understatement I’ve ever read. A catastrophe of this order – wiping over 50% off global market cap and a crisis collapse of big wall street banks – is not “change is in the air and good for startups”. It’s economic equivalent of Apocalypse !!!

Schadenfreude…?

Krishna, read the title again. It was never meant to serve as a two minute bulletin on whats happening and will happen during a collapse. In a single sentence it just say “a collapse will trigger, eventually, a rise in smaller companies” .Finito.

Vijay,

I had gone by your last sentence that read – “But coming back to the topic, So… why am I having a grin when I hear news about the economy? Because it means change is in the air, and its good for the startups. Absolutely!”

I was commenting on your summation !

Yep, big or small change is in the air and its good for the startups 🙂

Will you revert on my comments ? Hope U overlooked !!

Vinod, I thought I already mailed you. Getting to it right away.

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