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Why Bad Economies Are Good For Business

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Why start your own company in a bad economy? Try to ignore the gloomy media picture of the world coming to an end, a crashing economy, high unemployment, business failures and difficulty accessing loans. Yes, I might be asking for a lot, but why not focus on the positive?

The amount of registered US companies does not change drastically from year to year, regardless of the economic climate. Although there is no clear trend towards more companies being launched, the Kaufmann Foundation noticed something interesting: startups initiated in tough times have increased chances of success, with half of 2009’s Forbes 500 companies having been launched in bad economies. The same is true for the world’s fastest growing companies. If you would actually like to see some of the companies that made the best out of recessions, look at Inc.com’s report. Suddenly, a recession doesn’t sound too bad now, does it?

What are the potential reasons behind it? It is quite simple: to succeed in such an economy, you will need talented people, a great business idea, a clear need for your product or service, eager customers interested in your offer and the ability to perfectly manage finances.

Find Your Co-founder

It’s usually difficult to find the right people for the job because they are usually in comfy offices and well-paid jobs working for the dinosaurs running the economy. Now, thanks to round after round of layoffs, talented people are losing their jobs or having their paychecks decimated. This leaves them resenting their current employer and considering a swift departure. What could be better than running your own company, being your own boss, working with equally talented people and escaping the bureaucratic world for one in which you dictate all the rules? Finding the right co-founders gets easier as the number of creative people looking for a change increases.

Unleash Your Creativity

It seems that the entire business world is under scrutiny right now and most flawed business models are likely to show their true colors and be either revised or abandoned. Every industry is being analyzed for possible flaws and improvement areas, so if you think your idea could revolutionize the business world, or at least your industry, now is the time. The tough economy will allow the most creative, resourceful individuals to succeed, not the ones with the most finances; and since the ones that do succeed enjoy long-term success, why not unleash your creativity, get the little black notebook where you jotted down all your crazy ideas, and see which ones could literally transform the world?

Shai Agassi started Better Place after being challenged to find an idea for how he would go about reducing the global dependency on petroleum. Now, his business model could cause a paradigm shift that would result in a massive disruption to the automobile industry through the creation of an infrastructure that would support EV cars.

Pick an industry and think how you would change it for the better, brainstorm it with other people interested in your market, discuss it with your friends and family, and you might be able to generate equally brilliant ideas.

Find Your Niche

The businesses that manage to thrive in harsh economies are the ones whose services or products are truly needed. Why? Because most clients are likely to cut down on unnecessary expenses in order to save money. In all likelihood, if your product seems more of a luxury than a necessity, chances are you will not make it right now and you should maybe shelf the idea for a later time; but if you can deliver a revolutionary product, or service, then your chances of success are higher. If your product is a necessity, weaker competition from larger corporations means more chances to succeed, especially in niche markets which are usually overlooked as they do not meet the investment demands of large firms, but have growth potential and are attractive for startups. Market and technological discontinuities are the basis of market entry triumph; either can generate success and together they are unbeatable. Just find your niche!

Customer Development

There is probably no company out there not trying to cut down costs. Can you use this “spend-less” attitude to your advantage? Avoid the costs of hiring a huge team of testers or developers and use alpha-testers to fine-tune your product; offer it for free to the first customers so that they can test its features and give you valuable tips on how to improve it. The result? Valuable customer feedback that can make your firm customer oriented and focused on delivering customer satisfaction. If your initial testers are happy with the product, they are likely to continue to support your efforts, and they will also provide valuable testimonials and word-of-mouth that will help you promote your business and gain new clients. Offering your product to companies that cannot live without it but cannot afford it either will gain you the status of “life-saving”; not too bad in terms of publicity if you can keep your costs low enough to afford it.

Also, whenever a firm will need a certain service or product, each supplier will be under more scrutiny than ever and managers use extensive information gathering before each purchase decision. So if your product is at least equally good or who knows, even better, your chances of getting key accounts increase.

A Lack of Capital Can Lead to Clear Focus

Small budgets equal smart investments. If you only have a little money to spend, you have to focus on the important aspects of your business by using your funds to develop a better process, increase your product’s quality or provide better customer service. All of which can be transformed into significant competitive advantages and sources of revenue in the long-term. When differentiation is not based on who has the most money to advertise, then startups with a better product have a better chance of success.

Setting up an typical business will only cost you about 25K, and if you followed our previous blog post, then you know we don’t really think significant amounts of capital are absolutely necessary when setting the foundations of your business. Money is no longer the holy grail of setting up a successful business in a weak economy, so take your chances while finances lack importance and ideas get the spotlight.

Stick Together

Cooperation can help your company grow and small firms have to stick together. Partnering up with other small companies that can complement your offering is sure to provide you with an edge. If you are just at the beginning, it is highly unlikely you can cover an entire service area; you need viable partners.

The new economy should be about co-creation and not about destroying competition; if there is a way a different business out there could help yours, why pass on the opportunity? Find the right partners, research what they are doing, understand how they could add value to your own product or service and you might just get the recipe for success. It is up to new companies to set the pace for the future, so you can be one of the innovators that choose to stop regarding every other firm out there as your competitor. Instead, try to implement a new business philosophy that could render a better economic model.

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About the Author

This article was written by Carmen Neghina of Grasshopperherder.com. The website is dedicated to entrepreneurship and insights about the lean startup method. see more.

Entrepreneurship

Science is the Next Big Thing in Startups

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From pharmaceuticals to petrochemical processes: Newcomer companies and investors and investors alike are setting their sights on science. How the start-up scene moves beyond the mobile apps bubble…

For the last two years Silicon Valley analysts and venture capitalists are anticipating the burst of yet another bubble. This time, under the risk are the mobile start-ups which constitute the biggest share of the market. Out of 50 companies listed in Forbes’ “the hottest startup of 2015” (by valuation) only six companies are based on innovations in other-than-mobile area, one company provide cleaning services, while the rest are diverse mobile apps.

Meanwhile many products listed can be barely called innovative. A significant proportion of the listed start-ups are texting apps, apps for people search (starting from business partners to life partners) or delivery services. While those services can definitely facilitate one’s life, in general they differ from their predecessors by only a narrower audience.

Many venture investors expect stagnation if not decrease on the markets, which is why they start to transfer their capitals from start-ups offering customers software to start-ups offering specific solutions for existing businesses. Such companies are expected to demonstrate more stability in the near future.

The Market for Mobile Apps Might be Saturated

Back in 2012 a talented entrepreneur could walk into a venture capitalist’s office, say his startup was a mobile-first solution for pretty much any problem (payments! photos! blogging!), and walk out with a good-size seed investment. “That pitch was enough to get going,” says Roelof Botha, a partner with VC firm Sequoia Capital. “It’s not enough anymore.”

“I think investors are bored with investing in another messaging app. And our idea is crazy enough that it might just work. ”, has declared in 2014 Nadir Bagaveyev a founder of a start-up using 3-D printers to make rocket engines. By 2016 the company attracted investors funding sufficient to launch its first rocket.

Pharma and Biotech Start-Ups in High Demand

Currently the most successful science-based start-ups are the companies offering innovative solutions in the field of pharmaceuticals and biotechnologies. It’s noteworthy that despite the previous revelations and even judicial proceedings the list of the most expensive start-ups still includes Theranos, blood analyzing laboratory, whose story did not descend from the main pages of the global leading media from 2014.

It first amazed the audience with its fantastic take-off and then with its collapse. One of the crucial parts of the success story of this start-up is its fundamental difference from the majority of the services produced in the Silicon Valley. Unlike the others, it was not a story of yet another beautiful gadget for communication or mobile app, but the story of the scientific idea which intended to conquer the world.

The great success stories in other scientific areas are now happening on occasional basis. However certain facts allow to predict that the situation is to change soon. One of such factors is growing interest among the big corporations to attract innovative solutions from outside to develop their businesses.

Given the accelerating pace of scientific and technological development of the world, the activities of internal R & D departments are often turn to be insufficient to ensure stable development of innovative business. Outsourcing of the R&D may become the efficient mechanism to stimulate the growth of the company. And high-tech start-up can certainly benefit from it.

Start-Up Technology for the Petro-Business

In December, 2016 world leading companies in the field of gas processing, petrochemicals and chemicals announced their intentions to enforce their R&D capacities by attracting start-ups. 3M, AkzoNobel, BASF, The Dow Chemical Company, DuPont, Henkel, Honeywell UOP, LG Chem, Linde, Sibur, Solvay and Technip together created a global stage for startups and investors.

“The petrochemicals industry can and must rely on the potential of open innovations to facilitate further inventions and implementation of new solutions in all major application areas, from construction and medicine to packaging and 3D printing. Thanks to the participation of international partners, IQ-CHem is now the largest global project within the industry which attracts innovative solutions and provides for their implementation into practice,” said Vasily Nomokonov, Executive Director of Sibur, a company which coordinates the project.

Positive Experience in Chemicals and Beyond

Some of the listed companies have already gained positive experience in working with start-ups which may have driven them to elaborate a systemic approach to attract innovative companies.

At the beginning of 2016, SIBUR and RRT Global start-up reached an agreement to build a pilot plant for isomerization based on RRT Global technologies in Sibur’s Industrial Park SIBUR “Tolyattisintez”. According to Oleg Giyazov, co-founder and CEO of RRT Global cooperation with a large corporation bring significant advantages to his company.

“By cooperation with Sibur we get a huge industrial experience that enables us to develop technologies and solutions better fitted to the market demand. This advantage is often not given due attention, but we, on the contrary, see significant opportunities in it. Currently, RRT Global cooperates with several companies around the world” he said.

Another petrochemical leader BASF enjoys successful cooperation with Genomatica start-up. In 2013 BASF started the production of 1,4-butanediol based on renewable feedstock (renewable BDO) using Genomatica’s patented process and in 2015 the license was expanded to the Asian market.

Unlike traditional forms of cooperation between a start-up and a venture capitalist, a cooperation between start-up and a relevant corporation allows to minimize the risks associated with investing in a potentially promising idea where the key word is “potential” (but not “guaranteed”). While delivering services in the same field as the start-up the corporation gets an opportunity to more effectively and accurately estimate the market value of an innovative idea and to support its implementation.

Structural Changes Ahead: Outlines of A Coming Market

In the short term prospective, possibly in 2017, the global start-up market will face structural changes – both in terms of start-ups professional orientation and of funding mechanism. In the future science-based start-ups will dominate the market and will change our lives at a deeper level than the way of sending a text message or searching the restaurant for an evening meal. To be more concise this is already happening in the pharmaceutical industry, and the other scientific areas are to follow.

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About the Author

This article was written by Dominik Stephan of Process Worldwide. See more.

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Callum Connects

Norman Tien, Founder of Neuromath and Early Math Matters

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From a young age, Norman Tien, found his passion helping students as a math tutor and went on to translate that into a successful business.

What’s your story?
From the age of 14, I knew I would be in business for myself and started designing my company logo.

Growing up in a poor family, I worked part time while I was in school. That’s when I started tutoring and realised I had a gift to help students “see” mathematics. I delivered good results, and my students started to love math as well.

A turning point was when I was down with dengue fever and I realised I had to grow my business to the next level. I started a learning centre and that was the beginning of Neuromath. The initial years were tough as costs went up while my personal income took a dive. I almost gave up, but I pushed through.

Today, we have 3 specialty math enrichment centres managed and delivered by my dedicated team of teachers.

What excites you most about your industry?
“How to win” has always influenced how I position myself in the industry. I researched the psychology of learning, why some students are so naturally good at math, while others struggled. I managed to find the connection, and have always sought out niches to position myself so I can win.

In the beginning, I fused academic delivery with psychology to differentiate my services. Now I have a good team of teachers fully equipped with a psychological skillset.

In the next evolution of our business, we will incorporate technology into education in order to customise each student’s learning experience based on his or her needs.

What’s your connection to Asia?
I was born and educated in Singapore. One key driver why I started a business was, as a youth, I witnessed how my dad struggled daily as a taxi driver trying to make ends meet.

That said, I am very blessed to be in Singapore and to be given the right education. I see this as a very important factor to my success today.

Favourite city in Asia for business and why?
Singapore – well, for one, most of my businesses are here. Singapore is convenient for business and is very well governed. There are rules and systems that make the entire entrepreneurial journey more secure here. One big plus is the location: Singapore is a hub that allows us to connect to the world.

What’s the best piece of advice you ever received?
船到桥头自然直 –
There is a Chinese saying that when a boat goes near the pier, it will automatically align itself (with the current). It means we don’t have to worry too much, that things will take care of themselves.

A mentor once challenged me: “But who can guarantee you can even reach the pier?”

It is such a highly competitive world we are in, who can guarantee success? This is the ONE question that has been etched in my mind for decades. The Chinese saying always comes to mind when I am positioning, designing and strategizing for my business.

Who inspires you?
Mr. Lee Kuan Yew – The fact that he started ruling the country just like a startup. With limited resources, he was able to find a strong positioning to differentiate his country from the rest of the of Asia. With hardwork and proper planning, he transformed Singapore from a fishing village to a prominent financial hub in Asia.

Because Mr. Lee Kuan Yew positioned Singapore so well, government owned companies, such as Singapore Airlines, have emerged as the best in the world.

His story inspires me, spurs me to understand that success is not by chance but by design – every little step, all the strategies are all planned out. Not at all by chance.

What have you just learnt recently that blew you away?
My business coach, Marshall Thurber, shared with me the power of the “Trim Tab” – a small part of the rudder system in a ship. This Trim Tab, despite its small size, is able to influence the entire ship’s direction by turning it.

This metaphor helped me see that a man can influence the entire world if the right effort is applied. We are now living in an entirely new world, the way we commute with an app on the phone – that’s the power of the Trim Tab at work.

If you had your time again, what would you do differently?
I would embark on the same journey but I would seek a mentor at a very early age.

I have been through many hard knocks along the way, and I definitely could have shortened the learning curve if I had a mentor to advise me on the many aspects of entrepreneurship.

How do you unwind?
Driving down long highways helps me unwind, that’s when I let my mind relax and wander.

I love long distance driving and riding. My wife gave me a Harley Davidson Tourer for my 50th birthday and we intend to embark on riding holidays together in Asia.

Favourite Asian destination for relaxation? Why?
Hong Kong – I love the fast pace and the vibrance of the city. I love the cars there and it’s a very unique and exciting experience for me. And of course, I love the food there too!

Everyone in business should read this book:
One Minute Millionaire – this book highlights the mindset of an individual that is the key determinant for success in whatever we embark on. As long as we know we have a very strong reason why we need to do it, we can do it!

Shameless plug for your business:
I am the CEO and Founder of 2 Math enrichment brands:
Neuromath is a Specialist Math Learning Centre that helps students from Primary 1 to Junior College, empowering them with strategies, skills and a strong desire to learn and problem solve. We use technology to train students to avoid careless mistakes reclaiming 30 marks or more in Math exams and achieve their full potential in math.
www.neuromath.com.sg

Early Math Matters is a premier Mathematics and Cognitive Development enrichment centre for preschool children aged 3-6 years old. Through purposeful play and our renowned EMM approach, we help learners build a strong foundation for problem solving at an early age, and instil in them a passion & love for math that will stay with them for life.
www.earlymathmatters.com

We are actively seeking passionate teachers, entrepreneurs and investors who are keen to grow the education business with us.

How can people connect with you?
I speak regularly at workshops for schools, parents and platforms demonstrating the use of technology for peak performance in education.

Do contact me at
www.NormanTien.com

Alternatively, you can connect with me:
www.NormanTien.com/facebook
www.NormanTien.com/linkedin

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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