Recession is entrepreneurial opportunity

It’s inarguable that economic change coupled with technological innovation creates opportunity. In the 10 years between 1902 and 1912, the country was in recession three times for a total of 60 months. During that same time, the Silicon Valley of the early 1900s was Detroit. There were more than 1,800 automobile manufacturers in the U.S. between 1896 and 1930. 

Not many survived, but they all contributed to the collective learning that made the winners. Today, as the lifecycle of that product is ending, new disruptive vehicles will emerge to take advantage of large markets that are dissatisfied and want something better.

This cycle – economic hardship that creates a period of innovation that results in opportunities for entrepreneurs – repeats itself again and again.

Most people predominantly see the chaos. Some see the power in dissatisfaction and disruptive technology and begin to see new ways to take advantage of it.  Those who will venture out to try and capture new opportunities will be distinguished by 7 behaviors.

They will focus on opportunities that, if successful, will be big. The size of the opportunity will give the venture a fighting chance to change the world. I am looking at a game-changing treatment for osteoarthritis that, if successful, will make a positive difference to millions of older, active people.

They will create disruptive solutions to real problems. New products will be better and less expensive than their replacements. Zipcar, founded in Boston, took years to get going. But it has been a game changer in the way urban dwellers both save money and solve their transportation problems.

They will have risk-transferring business models that reward both the customer and the venture. I believe that focusing on hard questions is sometimes the solution to building real innovation. For instance, how do I sell alternative energy products at no risk to the buyer? I’ve recently seen an idea for alternative energy systems that the venture installs at the customer location – and sells not the equipment but the electricity, at a lower cost than the utility. The customer has no responsibility for maintenance or performance, but only for the cost of the electricity they use.

They have a team with expertise and deep knowledge in the area in which they are focused. The vast majority of the Inc. 500 are ventures founded by people who developed the idea from their own deep experience. Entrepreneurs learn from every experience and get better exponentially. And they build great teams. 

They have proprietary intellectual property to make their venture go. Or, they have no obvious gorilla who can sit on them. I looked at a business three years ago to rent a wireless device to sports fans going to a game. It allowed the fan to look at live stats and commentary during the game. Just like you can do on the iPhone today. The gorilla, of course, was Apple and its app distribution system.

They are great salespeople. Entrepreneurs have to be able to sell to customers themselves. The closer you are to the customer, the more likely it is that the venture has deep, proprietary knowledge about where the pain really is, and how best to solve it. Retail Target Marketing Systems, Inc. was founded by a couple of us who spent all of our first year with our customers.  It was the foundation that set the orientation of the company for 15 years.

They understand bootstrapping, risk and finance. Sales revenue is a strong source of investment capital. Understanding how to make do with less than you think you need – while accomplishing the right goals – makes good ideas stronger faster. Greg Gianforte started RightNow Technologies with a spec sheet, a telephone and the determination to make a difference. Those early sales launched his company.

This market disruption is one of the best opportunities we’ve seen in our lifetime. I’m going to go look for a new venture idea!

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