Why the downturn could separate recession-proof startups from hacks – TechCrunch

The good news? Well-run companies can still thrive

The inevitable physics the economy is ahead of us – what goes up must come down – and we seem to be heading to the bottom of the equation.

But not all is lost. If you need a reminder, Venmo, Instagram, Uber and WhatsApp they all started during the Great Recession since 2008

When I think of recessions, I remember what an electrician said while working on my house during the dotcom explosion. I asked him if he was worried that the economy would affect his work, and as he drilled another hole for the wiring, he looked at me and said, “No. A bad economy just removes hacks. ”

If your company lacks basic business fundamentals and is burning money, well, you may have to pay. But again, maybe you’ve always been. But if you have a well-founded startup built on a good idea with a solid foundation, you can probably handle any storm that comes along.

The question is: Are you building something fundamentally at the core of your client’s business that Operator Collective founder and CEO Malun Yen calls painkillers? Or are you building something less important, which she calls vitamins?

Painkillers against vitamins

“Companies that produce painkillers, not vitamins, especially solutions that are technically difficult or difficult to develop, or anticipate fundamental but still untapped changes in the industry, are particularly well positioned to withstand macro conditions beyond their control. “Painkillers include products that increase revenue or significantly lower costs in a tangible way,” Ian told me.

She said these startups could be in any category, as long as they help companies work smarter, which is even more important in an uncertain economy.

“For example, we have a company that we invest in that allows customers to significantly increase their sales by allowing them to do things in a way that has not been done before. Another is a significant reduction in cloud infrastructure costs – a sore point that will only increase for companies as a whole, as more data is stored in the cloud and relevant requests and other analyzes need to be performed.

Derek Zanuto, general partner at CapitalG, said that while many companies will experience some short-term difficulties due to market fluctuations, his company still expects to see many of them grow and thrive in the coming years.

“Some of the largest companies were founded or emerged stronger than ever during the weakening market conditions. I’m especially keen on start-ups that help businesses use the power of their data. “When used well, data can help businesses both manage costs and generate more money, making it a recession-resistant business sector in the long run,” Zanuto said.

Soma Somasegar, managing director of Madrona Ventures, said his company is investing in smart applications, adding that no matter what happens in the macro environment, they stick to the plan.