2. The pandemic downturn might yield a new startup wave
The American economy is in a dark period right now, but some in Silicon Valley are optimistic it could spawn a generation of startups, Axios' Kia Kokalitcheva reports.
Why it matters: It may sound counterintuitive to launch new businesses in the middle of an economic crash, but it's worked during past downturns, and Silicon Valley's founders and investors remain willing, so far, to keep rolling the dice.
The big picture: Y Combinator, the famed startup accelerator program, is seeing 15%–20% more applicants for its summer program, admissions chief Dalton Caldwell tells Axios — a sign that some entrepreneurs want to forge ahead both with new ideas and with companies they’ve already been working on.
- Y Combinator’s free, online Startup School is also seeing increased interest. “More than 600 founders have signed up for our course every week since March, and in recent weeks, we've seen that number spike to over 1000,” per a statement.
- “In a week, we’ve had 500+ Future Founders join from companies like Stripe, Uber, Lyft, Robinhood, Airbnb & Opendoor,” Chapter One managing partner Jeff Morris Jr. tweeted last month about the list of aspiring entrepreneurs he’s put together.
- Investors are also creating ways for startups to pitch them online, and programs like On Deck continue to help would-be founders year-round.
What’s happening: Initiatives like Cleo Capital’s Chrysalis and Chapter One’s Future Founders list are hoping to help newly unemployed tech workers explore starting new companies, while accelerator programs are seeing an uptick in interest.
- “For the first time in a decade, product people and engineers are open to looking at new jobs,” Cleo Capital managing partner Sarah Kunst tells Axios.
- Layoffs have been swelling at startups, larger pre-IPO tech companies, and publicly traded firms like Uber and Lyft.
- Some are choosing to take new jobs, but many likely have the financial resources to step back and consider another route.
How it works: Kunst’s program, dubbed Chrysalis, will select about 100 applicants from a pool of experienced tech professionals who are not currently employed and connect them online via Slack, the work chat app, in the hopes they find others interested in pursuing similar startup ideas.
- “It’s more like a writer’s retreat. … You’re there because of the community and accountability,” Kunst says.
What's next: It's too early to know what these new companies look like, how will they function, and what will they build.
- Some categories require in-person work, like robotics or other physical products that can’t be developed online remotely the way software can.
- Caldwell notes an uptick in startups in delivery, logistics, health care, e-commerce tools, and virtual alternatives to in-person industries.
Yes, but: Not all the startup signals are bullish. Notably, equity management company Carta recently laid off 16% of its staff in response to lowered expectations about new startups being formed in the near future.
Flashback: Recessions have often triggered startup baby booms. After the dotcom bust in the early 2000s, a wave of small companies emerged to build "Web 2.0." And many of today's industry leaders got started during the Great Recession of 2008–2009.