Jonathan Aberman: Tomorrow’s Great Companies Will Be Created During These Hard Economic Times

A surprise speaker was on hand at the recent Startup Rockstarts demo event in Falls Church, Virginia. Amplifer Ventures partner Jonathan Aberman offered his thoughts on the challenges and advantages facing startups in the current economic climate.  His remarks were both extremely insightful and encouraging.

There have been a number of interesting comments coming out of the venture capital community in response to the financial crisis.  Programmer and venture capitalist Paul Graham stressed frugality in a recent article.

Fortunately the way to make a startup recession-proof is to do exactly what you should do anyway: run it as cheaply as possible. For years I’ve been telling founders that the surest route to success is to be the cockroaches of the corporate world. The immediate cause of death in a startup is always running out of money. The cheaper your company is to operate, the harder it is to kill. Fortunately it has gotten very cheap to run a startup, and a recession will if anything make it cheaper still.

These sentiments were echoed even more emphatically by others. Sequoia’s R.I.P. Good Times presentation stated simply “Spend every dollar as if it were your last.”

We enjoyed hearing a uniquely east coast perspective from Aberman, however. Given that the front lines have shifted from New York to Washington, D.C., it seemed all the more important to hear a local expert speak on the matter.

Aberman began by noting that some of technology’s greatest companies were started in challenging economic times. This was not a coincidence. Good times and easy capital tend to obfuscate the relative quality of business models. Accordingly, it can be difficult to differentiate the excellent enterprises from the weaker ones, particularly as the field grows. He also indicated that his firm and other local peer firms would continue to meet with startups and were in the process of closing several new deals.

Aberman acknowledged that many aspects of running a startup would become more challenging. Raising capital and finding customers would become more difficult and some companies will exit the market as a result.

Despite this, he encouraged the startups in attendance. “Don’t get discouraged – in fact, double down. If you can succeed in these economic times, you can succeed in any.” Aberman stressed in particular that the field would thin considerably over the next year or so and concluded by remarking that if one is willing to make sacrifices and really dig in, this economic downturn could be a tremendous opportunity.

One of the most interesting insights Aberman offered is that there is a huge new source of capital available. For the first time since the dot-com era began, the advertising budgets of major companies are available to startups. As downward pressure is exerted on the budgets of corporations, they will seek to move ad dollars away from traditional sectors as they seek higher returns. This in particular, Aberman noted, could offer a tremendous opportunity to startups focused on creating innovative advertising opportunities.

This last portion was particularly encouraging for us at Contribune, given our excitement about contextual engagement based ads. Overall, the remarks, along with the startup presentations that followed, were reinvigorating – but the challenges are clear.

Thanks to 1 Piazza’s Paul and Kady for the putting together the event and finding such an interesting guest speaker.

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