Why a recession can separate the recession-proof startups from the ‘hacks’ – businesstraverse.com

The good news? Well-run businesses can still thrive

The inevitable physics of the economy is right around the corner – what goes up must come down – and we seem to be heading for the downward part of the equation.

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

When I think about recessions, I remember what an electrician said while working on my house during the dotcom explosion. I had asked him if he was concerned about the economy affecting his work, and as he drilled another hole for the wiring, he looked up at me and said, “No. A bad economy just removes the hacks.’

If your company lacks basic business principles and burns cash, you may need to checkout. But maybe you always were. But if you have a well-founded startup built on a good idea with a solid foundation, you can probably weather any storm that may come.

The question is this: Are you building something essential into the core of your client’s business, what Operator Collective founder and CEO Mallun Yen calls pain relievers? Or are you building something less essential, what she calls vitamins?

Painkillers vs Vitamins

“Companies that build painkillers instead of vitamins, especially solutions that are technically difficult or tricky to develop, or that anticipate fundamental but yet mainstream shifts in an industry, are particularly well positioned to deal with the macro conditions beyond their control. to endure. † Painkillers include products that increase sales or significantly reduce costs in a tangible way,” Yen told me.

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

“For example, we have one company that we invest in that enables customers to significantly increase their sales by enabling them to do things in a way that has not been done before. Another is significantly reducing cloud infrastructure spend — a pain point that will only increase for businesses across the board as more data is stored in the cloud and the associated queries and other analytics must be performed.”

Derek Zanutto, general partner at CapitalG, said that while many companies will experience some short-term hiccups due to market fluctuations, his company still expects many to grow and prosper in the coming years.

“Some of the largest companies were founded or emerged stronger than ever during weakened market conditions. I’m especially optimistic about startups that help companies harness the power of their data. When used properly, data can help companies control costs and generate more money, making it a recession-proof business sector in the long run,” said Zanutto.

Soma Somasegar, president of Madrona Ventures, said his company has invested in intelligent applications, adding that they stick to the plan no matter what happens in the macro environment.