On the 4 reasons startups thrive during times of upheaval

I wrote previously on Silicon Valley’s singular focus on coronavirus, and the remarkable degree of focus, optimism, and proactivity I’ve seen exhibited by technology entrepreneurs in recent weeks. This post will focus on a few reasons why startup founders are uniquely positioned to handle the stress, uncertainty, and quick pace of today’s crisis environment, and why technology startups are uniquely positioned to profit from it.

#1 — They’re used to it

Reid Hoffman, founder of LinkedIn and general partner at Greylock, once said “An entrepreneur is someone who will jump off a cliff and assemble an airplane on the way down.”

Anyone who has founded a technology startup is accustomed to rapid change, psychological distress, and a high degree of uncertainty. In other words, we’re built for this! Starting a company is a highly risky endeavor, both financially and emotionally, so the financial and emotional stress that much of the world is feeling right now is already quite familiar to startup founders.

Even amongst my own friends, I’ve noticed a stark difference in reaction to this crisis from the entrepreneurs and non-entrepreneurs. While everyone feels stressed, the entrepreneurs view this is as just another existential crisis to navigate, whereas the non-entrepreneurs seem to exhibit less agency and resiliency.

#2 — They’re decisive

If you’re a doctor or a CPA, there is a ‘right way’ and a ‘wrong way’ for almost everything you do professionally. You invested many years of education and practice to learn the right way, and once you know it, it’s just a matter of staying abreast of the latest best practices and implementing your knowledge.

The job of a startup founder is much different. There is no ‘right way’ to grow a company, just an endless stream of fast decisions that must be made based on imperfect information. While experience can and does help, this is mostly in the sense that it improves a founder’s intuition rather than his or her knowledge.

In today’s environment, every individual and business must make fast decisions based on imperfect information. For an individual it could be as simple as whether it’s safe to go grocery shopping, and for a business whether to maintain staff in hopes of a recovery or reduce staff in preparation for a recession.

The smaller the company, the more accustomed its leadership is to making quick judgement calls and the more quickly they can make them.

#3 — They’re adaptable

This is the startup superpower that will become most visible to the outside world. I’ll summarize it as follows:

While Delta can’t be anything but an airline and Hilton can’t be anything but a hotel chain, a startup can be whatever it wants.

Startups have a unique ability to quickly change strategic direction based on new information or environmental changes. We call it a “pivot” and startups do it often even during normal times, but it’s an especially useful skill during times of upheaval.

A recent startup founder survey by our friends at NfX found that 36% of startups are already pivoting their product due to this crisis and that 62% of these pivots are moderate to significant. Could Delta or Hilton pull that off?

#4 — They will profit

This is a natural consequence of the things above, and the one I’m especially excited about as a venture capitalist. Not only will startups create technical solutions to many of the greatest problems facing the world today, they will make a lot of money in the process for founders, investors, and employees.

Think about all those pivots that startups are making right now. While some of them are pivoting just to survive, others are capitalizing on brand new market opportunities that came as an immediate result of today’s upheaval (and many a combination of both).

A market economy will always reward those who most uniquely serve the needs of customers, and in times of upheaval, nobody can serve the world’s new needs better than startups. Just in the past week, I’ve spoken with startups working on things like:

  • Helping airports identify sick passengers using IR cameras and AI
  • High-volume/lost-cost Covid-19 antibody testing using saliva
  • Training newly unemployed workers with today’s most needed trade skills
  • Helping mobile app builders solve bugs caused by SIP-related usage spikes

Each of these are massive opportunities that didn’t exist a few weeks ago, and startup founders are already building companies to address them.

So while nobody is happy about the coronavirus crisis and its terrible humanitarian and economic consequences, we can all celebrate the fact that technology startups are well-positioned to help lead our way out of it.

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Jared Heyman

Tech guy and investor. Founder at Rebel Fund and previously Pioneer Fund. Chairman of Infosurv and CrowdMed (YC W13). Former Bain consultant. Data nerd.