6 tips for startups to take advantage of the recovery

March 30, 2011

— Chris Lynch is vice president of economic development at the Irvine Chamber of Commerce. The views expressed are his own. —

With recent reports the economy is becoming stable and showing signs of upward growth, the question is what are entrepreneurs going to do about it?

The answer is simple, they can take advantage of the upbeat perception that the economy is in recovery and benefit from the opportunities they didn’t have before. The following are some tips on how entrepreneurs can take advantage of the recovery, based on years of experience coaching successful startups.

1. Get a good start on the recovery. Right now the market is solid for proven ventures, but in about 18 months the market will be ready for riskier ventures. This is a critical time for when opportunities will be made, so start making new contacts, solidifying your business model and creating potential business relationships right away. Look into entrepreneurial or business workshops, such as what we provide at the Irvine Chamber of Commerce and the Irvine Entrepreneur Forum. An economic recovery is a good time to capitalize on the optimistic mood of investors and put your business out there in front of the right people. So make sure to perfect a quick elevator pitch and consolidate all your financial information.

2. Take advantage of the opportunities. It’s important for entrepreneurs and startup businesses to pay close attention to the opportunities and general attitude towards investing during a recovering economy. The fact that investors are becoming more willing and openminded towards investing is a good place to start. This means that the money is starting to flow back into venture capital and other investment options. People are looking for new places to put their cash and every entrepreneur should take advantage of the opportunities by getting their innovation out there to potential investor groups.

3. Consider the entrepreneurial landscape for 2011. Successful investors try to anticipate the future of business growth and need to have foresight as to where the demand will come from. They will look for new ideas and industry innovation, from major corporations that have shifted to doing R&D internally, to looking for acquisition of new technologies. A startup business will have to fulfill a demand, and the fewer number of options out there will result in a greater demand. Coming out of a conservative past few years, it’s advantageous to position your business more as a necessity for 2011 and not as a luxury.

4. Consider the hot industries for 2011. While some of the strongest markets of 2010 are going to get stronger, there is still more room for growth. For example, the hottest industries of 2015 probably won’t revolve around the same leading companies of 2010. In 2005, we weren’t looking at Facebook, Twitter or digital streaming entertainment by Netflix. For the most part people were just getting into MySpace and still renting DVD movies at Blockbuster. I suspect the leading companies in 2015 will likewise surprise us since we might just be hearing about them now.

5. Know what investors look for in a startup. Investor groups will be looking for businesses that have a proven business model, a potential for financial growth, and a strong management team to support the company. Some investors may be intrigued by companies that fall within current trends, but that is not always the case. They will want to see that your product/service not only fits a market, but also stands out amongst the competition. When it comes to the business model, make sure to do your research as well. Without proper market research, a unique selling proposition, and a solid marketing plan, investors will be wary in investing in your idea. Investors will only be comfortable putting their money into a business that is poised to succeed.

6. Know what investor groups want to avoid in a time of recovery. Despite how much money is out there, any type of risky, unproven, business propositions are still a gamble that investors most likely won’t be willing to take. Be proactive and take advantage of the recovery by considering what you can do to move your concept along. If you’re a riskier venture or unproven technology company, the next few years will be about positioning. Riskier ventures are those that require a significant amount of investment before experiencing a significant amount of return. For the most part investors will be shying away from companies who are too risky, and looking at ones with a lot already invested in them – i.e. “sweat equity”, and ones that fit into their business model.

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In my opinion small businesses are what is going to pull our country out of the financial crisis we are in – this is very helpful and timely information.

Posted by MichelleDunn | Report as abusive