Starting Up When the Economy is Down
Thousands of students will graduate from MIT in June with ideas that are innovative and marketable, but the economic landscape before them is rocky. Knowing this, is now a good time for them to launch start-ups?
Ted Acworth MBA ’07, CEO of Boston-based start-up Artaic, says yes.
Acworth’s company uses custom graphics software and robots to manufacture high-end mosaics at a rate that is significantly faster— and cheaper—than most traditional mosaic assembly done by hand. Acworth launched the company in 2007, after studying as a Sloan Fellow at MIT.
“As long as you’re realistic about how long it’s going to take you to get profitable, and you can plan for that, you’ll be okay,” he says.
Artaic is currently cash flow negative, burning through more cash than they’re earning. But because Acworth had anticipated this period, he’s confident. The next big milestone will be to become cash flow neutral, he says, and then cash flow positive.
“It’s a great time to start a company because, realistically, you’re not going to be selling anyway. We’re using the down cycle to do our homework and get our company organized so that when the recovery does happen, we’ll be poised to make sales quickly.”
Joe Hadzima ’73, SM ’77, senior lecturer at Sloan, board member of the MIT Enterprise Forum, and founder of IPVision, has assisted in the founding of over 100 companies and advised entrepreneurs, high- growth businesses, and venture capitalists. He points to another silver lining of economic downturns: ready talent.
“In downturns [it’s easier] to find quality people at reasonable compensation levels, versus, say, the top of the Internet bubble when wage demands were high and the available talent pool was drained,” he wrote in a recent email.
Acworth corroborates Hadzima’s claim, marveling at the fact that nearly 50 resumes flew through his door when his company advertised a new position.
On the other side of Boston, Siddhartha Goyal ’99, MNG ’00, MNG ’03, is a founder of Assured Labor, a start-up that has created a mobile marketplace to connect employers with workers in their social network. Goyal suggests thinking of the restrictions imposed by the weak economy as an opportunity.
“Innovation really begins when you are forced to think about existing problems in a new way. You tend to come up with new ideas, and that’s something that MIT students are very good at,” he says.
Being focused is important, but Hadzima also points out reasons for caution. He’s more worried today than in previous downturns because the limited partners of venture capital firms, such as university endowments and pension funds, have been experiencing serious losses because of the stock market plunge.
“Venture capital funds don’t have as deep pockets to fund the start-ups through the downturn…This will make things harder for start-ups. It will require more focus and tighter control of expenditures,” Hadzima says.
Goyal agrees that it is harder to get businesses off the ground, but there are ways. One hint: “Follow the stimulus money,” he says. “You can see all sorts of opportunities for where there’s going to be investment in the future.”
