The startup guide to launching in a recession

The current U.S. stock market correction is panicking many. However, in the VC ecosystem, the past five years have been marked by turbulence.

Statistically, only four out of 10 corrections lead to full-scale bear markets. And even if one materializes, opportunities prevail. VC funds hold $308 billion in dry powder — nearly 3x higher than pre-COVID levels. But while predicting a bear market is difficult, preparing for one isn’t.

What should founders do?

Set nonnegotiable goals: Identify a clear milestone that must be achieved regardless of market conditions — whether it’s hitting a customer satisfaction metric, releasing a killer feature, or securing a major client. This should be the priority.

Distinguish between mission-critical and “nice-to-have” expenses: Once you’ve set your goals, the next step is ensuring resources are allocated effectively. Separate mission-critical expenses (key hires, essential services) from those that are not — such as engineers working on noncritical features or experiments that are yet to be proven worthy. You’ll need to make quick decisions, and knowing what to cut is key.

Validate the goal with prospective investors: Don’t hesitate to ask prospective investors directly: If we achieve this goal, will it set us apart from our competitors? If it makes your startup outstanding in a bull market, it will make you more fundable in a bear market.

Build your investor pipeline: Start building relationships with potential investors before you’re actively fundraising. Keep an eye on their available dry powder. If a fund relies on future fundraising to deploy capital, it could pose a risk. Focus on funds with enough liquidity to support you through a downturn.

So, what should you do if you are a sick care entrepreneur? Here are some resources:

1. Why recessions are a good time to start a business
2. 27 ways to recession-proof your business
3. How to start a business in a recession
4. Recession fundraising
5. How startups should handle the downturn
6. Why startup investments might be the best strategy during a recession
7. Seven ways you can financially prepare for a recession
8. How to hire during a recession
9. How to scale your business during a recession
10. Time to take and early exit?
11. Be sure you have a ransomware response plan
12. Protect your health
13. Three ways to innovate in a downturn
14. Here’s the six-part offense playbook 
15. Tips for founders amid tough times
16. 5 ways startups can prepare for a recession
17. 32 ways to save your business in a recession
18. Sick tech side gig microeconomics
19. Where are the post-Pandemic sick care turnaround opportunities?
20. The 6Rs of career transitioning
21. When to pull the plug... and learn from the experience
22. Cut salaries or cut people?
23. After SVB flameout, what's next for entrepreneurs
24. Could a recession be the best time to launch a tech startup?
25. How to surthrive a recession

Here are some successful companies started during a recession.

As more doctors quit medicine, the supply of those looking for side gigs increases. If you are one of those, consider the impact of a recession on the microeconomics of side gigs:

You will need to adjust your side gig expectations:

1. Reduced demand

2. Altered compensation agreements

3. Emphasis on results

4. Need to sell

5. Harder for find investors

6. Broken promises

7. Increased supply of those dropping out looking for side gigs

8. Need to build a strong personal brand

9. Impact of taxes and inflation on compensation

10. Economic and political uncertainty

Remember, recessions don't last forever. Be prepared and get ready to grow at the turnaround.

Arlen Meyers, MD, MBA is the President and CEO of the Society of Physician Entrepreneurs on Substack