If we take a longer view, though, there’s good reason for optimism. Historically, the most exciting and generation-defining startups have been those built in challenging times. Think of Facebook, launched in 2004, in the shadow of the dotcom bust. Google also raised capital in this period and managed to grow through the broader economic slowdown. Fintech companies like Square and Stripe were founded in the wake of the 2008 subprime crisis, which dented confidence in mainstream finance. Why might this be? First, different economic cycles attract different kinds of entrepreneurs. When money is running hot, investors meet plenty of “momentum” founders: people who are riding a wave, and who can easily find another job if things don’t work out. But entrepreneurs who build companies after a downturn are a different bunch. They usually have a meaningful vision that they’re going to realize, no matter what, and they tend to be relentless in pursuing it. With fewer job opportunities to fall back on, they—and their employees—will naturally be more attached to the success of the company. This kind of dedication filters for those who can relentlessly execute, and it generates companies poised to better take advantage of opportunities when economic conditions improve. A second benefit of starting a business in a downturn is the shortage of competition. In bull markets, there might be a dozen other businesses trying to outcompete you in almost any sector. But during a recession, there will be fewer people trying to get a cut of the action. This leaves the space wide open for motivated entrepreneurs to seize the first-mover’s advantage and claim the market. Finally, companies created after a crash also find it easier to source the talent they need. When the business cycle is in an upturn, attracting and retaining the right people to help you grow is often a founder’s number-one headache. Talented workers are flooded with opportunities and tend to jump between companies more frequently. But with fewer well-capitalized companies vying for talent, you might have a better chance nailing the right executive hire. These reasons show why, in 2023, we can expect the launch of the most transformative companies of the coming decade. The type of businesses that will bloom will be a direct response to the many crises that have affected us in the past few years: Covid, the war in Ukraine, record temperatures and wildfires caused by climate breakdown. For example, because of the pandemic and the pressure on health care systems around the world, expect to see an upswell in companies seizing opportunities in health care and pharma. These will include AI-powered medical technologies that tackle the systemic problems of national health care systems and the use of mRNA vaccines to tackle other diseases like malaria and diabetes. Another major trend concerns climate and the environment. Many entrepreneurs today are gearing up to address environmental problems and the second-order consequences head-on, targeting sectors like energy, transportation, manufacturing, and finance, among others. Escalating geopolitical tensions, from China to Ukraine, have also brought questions of security, autonomy, and stability to the fore. This new geopolitical environment will result in opportunities for new companies in strategic areas like defense, hardware, cybersecurity, energy, and food. In 2023, businesses tackling the enormous challenges that confront society might not start out looking like world-beating companies. They’ll have to be scrappy, resourceful, and lean. But you can be sure, in a decade’s time, they’ll be the names on everyone’s lips.
