Pros and Cons of Launching a Startup Right Now

What should you consider before launching a startup during these tumultuous times? And what are the obvious reasons to launch it anyway?

Starting a business these days seems like an extremely short-sighted endeavor. Nothing is certain, the future remains unclear, markets are unpredictable, and so on. But if you think about it, there are certainly some pros after all — and a con. And it’s an important one, so let’s start with that.

Funding a startup is nowadays much harder compared to the fall or even winter of 2019–2020. Like everyone else, funds operate in a state of uncertainty or revise their investment strategies altogether. Startups are now judged by their ability to show revenue, not growth — contrary to how things were before the pandemic. Even the funding process itself is quite lengthy today, and that may be disastrous in case money is needed for operational expenses. But investments keep flowing, and angel investors go on looking for interesting projects.

That’s all about cons, so let’s proceed to pros — the possibilities.

People, along with investments, are probably the most important element of any startup. And in that sense, the shrinking economy plays into the hands of founders. Employees are less ambitious and agree to work for lower salaries, especially with large companies cutting their staff radically. There’s a myth that corporations act delicately when it comes to firing people, trying to keep the most valued ones — but most of the time they don’t. Layoff surges in big companies affect entire departments, especially in marketing and related areas that get cut first. Of course, that is not a mass phenomenon yet, but as an employer, I have already noticed would-be contractors getting easier to deal with.

Another possibility involves using your BisDev potential. Back then when it was all good, potential clients did not bother looking at alternative solutions that could be profitable in the long term. Now the situation forces them to cut expenses, so BisDev can suddenly become rather effective even in cases where it was once rejected.

The third major opportunity is related to the user acquisition process that is now cheaper than ever because of big boys cutting their enormous budgets. Once they quitted the auctions, the fall in prices followed. So it should be no surprise that a lead with an acquisition cost of $10 is now worth just $7 or $5. Of course, it’s not all that simple. In tourism, for example, this decline in acquisition costs is not very relieving for obvious reasons.

The fourth advantage of a startup is closely related to the previous points yet more global in nature. The perfect storm we’re facing slowly starts disrupting the industries we used to consider monolithic and well protected from any changes from the outside. Take insurance — time stands still there. Of course, these are not tectonic shifts that would totally turn everything over yet but rather tiny niches or fractures you can enter with a new idea. The insurance industry is only an example. The number of medical startups has grown many times lately, and the personalized nutrition market is emerging even faster. Don’t be afraid to explore the areas you always considered divided between huge corporations that are older than the pyramids.

I’d like to sum this up with an essential remark. All these opportunities exist just here at the moment. Nobody knows how it will be tomorrow. Anyway, dealing with uncertainty is a part of the daily routine in any startup. Good luck!

Artyom Martynov, Head of Strategy at Admitad Projects’ startup studio:

Less ambitious employees bring in three to eight years of market expertise at a price of monthly salary. This directly affects the metrics:

  • They remember five other startups who did the same thing and personally know the products of four of them, including the exact mistakes. This saves 2–3 months of testing different business models.
  • There’s a chance an employee like that has already found the best way of solving the problem our startup aims to resolve. In this case, we can skip the solution validation and go right to the sales.
  • They have contacts of all relevant people in the industry and can introduce you to them without additional steps, reducing the deal cycle from 2–3 months to a couple of weeks.

Pavel Potasuyev, Accelerator CEO at Admitad Projects’ startup studio:

There’s no difference when to launch a startup!

Success is calculated by multiplying the magnitude of customers’ need by the number of customers.

If you come up with a great idea on how to do something new (or maybe something old but so that it helps people save money and effort), it will always resonate with investors.

And besides, you don’t need too much to validate your idea:

  • Prove that the need does really exist.
  • Estimate the average check.
  • Calculate the potential number of clients (using any convenient method).
  • Specify the break-even point just in case, i.e. when it happens and what resources are required.

It doesn’t really matter what’s going on, be it a crisis, recession, or zombie apocalypse. Fluctuations of the job market, advertising costs, and server hardware prices are balanced by investment instruments — thankfully, they are many. This issue is purely technical, and it should be addressed like a common organizational problem.

In a word, no difference.

Vadim Ananyev, Incubator CEO at Admitad Projects’ startup studio:

Why should you launch a project right now? Because challenging times like these give rise to business models and projects that can actually withstand crises. Not every industry is ready to change, and the current situation clearly shows that. Take HoReCa for example. Restaurant owners are the ones who most actively demand support from the government, despite the fact that their market is an old one, and they don’t even know what their customers are up to now.

Many delegate key business processes to utterly incompetent people. You should be thinking about making your company profitable and successful, not about avoiding bothering your CEO. Our market is so narrow-minded, stubborn, and petty that it’s perfectly clear that only unique projects will survive, not those based on primitive reselling models. Of course, they won’t probably reach the level of big tourist aggregators, but mobile games studios are on the rise now.

We used to take into account all possible risks. However, yet another condition had to be added to the analytics: what happens to the project in case of another lockdown. The lack of a precise answer is exactly what made us rethink our methods and plans considering the current work on portfolio projects.

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