In my perspective, the economic climate should not dictate whether an idea should be pursued or not.

By economic climate I mean standard recession-growth cycles the world has experienced through the 1900s and 2000s.

I am not referring to conditions of extreme duress - like the Great Depression or the Oil Crisis or the two World Wars during the last century.

The whole point of a start-up is to bootstrap an idea which can make a positive impact on particular people, places and things.

The only difference between kicking off a start-up during recessionary conditions and growth conditions is that success takes longer to achieve.

If your start-up's idea revolves around discretionary expenditure - then clearly the customer uptake for this product or service is going to be slow.

If you are going to do a start-up in a recession:

a) Don't kid yourself. Have the guts to decline funding and put the idea on ice if the climate isn't conducive to your initial forays.

a) Run the leanest possible operation you can. Execute small, but execute well for your client-base.

b) Use the slow period to plan for the upturn... when growth conditions return you are likely to be better positioned and more credible than opportunistic start-ups that are under pressure for quick exits by their VCs.

There are many start-ups whose ideas actually can see more uptake during recessionary conditions. In IT for example, budgetary constraints and increased competition in recessions force CIOs to figure out ways to compete using 'asymmetric' technologies. In these conditions, they are more likely to take a risk with technologies that require less investment but have the potential to make decisive impacts to their operation.

So in my experience, smaller service providers and start-ups have the potential to thrive in these conditions if they run lean, execute well and focus on customer needs.

Warren Buffett - amongst all this chaos, why is he buying into Goldman Sachs and Wells Fargo? He isn't nuts - he just knows that good companies with good operations and good ideas are impervious to standard economic duress. It's all about value for him and start-ups should have the same mentality.

Ok, enough of the genericity...

To specifically answer your question - getting rounds of funding is going to be tough in 2009 and potentially 2010. Start-ups are going to need seriously credible teams backing compelling ideas to get funding. That holds true in any year but more so in times like these :).

Cheers,

Zubin.
http://zwadia.com