Raising money for a new startup in these economic times can be at best difficult and often impossible. But there are silver linings that may make the current environment a godsend for the frugal entrepreneur.

If you have been able to put together enough cash from friends and family or angels to get started it could well be the perfect time to launch your new venture. Here’s why.

1. Cheap Resources - talented engineers and business people are available in far greater numbers today. The entrepreneur is far less likely to find price tags for top talent being bid up. Even the big guys who are not laying off staff are freezing all but essential hiring. Other startups that overcommitted during the heady days of the last boomlet are having to lay off strong employees or, in some cases, shuttering operations entirely. For those engineers who once thought that startup life was too risky, recent massive cuts at companies like Microsoft have exposed this illusion of security. They are now more willing to take the risks inherent in an entrepreneurial venture.
2. Less Competition - In times of free flowing capital an entrepreneur could expect competition from well funded entrants. Your scrappy startup often had to vie for market share with companies raising war chests in the millions. Those well funded competitors could easily garner all the attention even when your product or service was far superior. Today, these crazy deals are no longer being funded. At least not in the numbers they were a few years ago. The result is a more level paying field where the merits of one product over another are more highly valued. This recession is not likely to end soon. What better time for a startup to be in pre-revenue mode than one where there is little revenue to be had. The market will come through this and the smart startups will be ready with new products and services when it does. And you may just be the only one prepared to take advantage.
3. Enforced discipline – Starting a new company when resources are lean forces the entrepreneur to think through every expenditure. Fiscal discipline, forged as habit in tough times, stands to both increase profitability and your attractiveness as an M&A target when the market stabilizes.

Today’s financial world is filled with uncertainty. But uncertainty is the very essence of a startup. Smart entrepreneurs will thrive with uncertainty as home filed advantage.

Hoyt Prisock, the author of this post, is a Seattle serial entrepreneur and NWEN Board member.  He has started companies in both boom and bust times.  He blogs at http:bigshoebox.com

Tags: bootstrapping, funding, startup finance

This entry was posted on Friday, March 20th, 2009 at 5:01 pm and is filed under Entrepreneur resources. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.