In a lot of ways, starting a business is like having a baby—there’s never a perfect time to do it. But there are times that are better than others.
Believe it or not, a recession like the one we’re in right now might very well be one of those times. Of course, the decision to pursue your entrepreneurial dreams is highly situational, but the economic fundamentals of a recession make for a strong case to get going:
All that said...there are enormous risks, too. During recessions, venture capitalists hold their checkbooks tight, and the chance of your business failing in the first year balloon beyond the typical 20% likelihood of going belly up in good economic times.
There are plenty of variables here. So how do you know if a recession is the right time to start a company? You ask the expert: David Cancel, entrepreneur, investor, and serial founder. He’s started and sold four companies over the last two decades, and now he is the CEO of marketing and sales platform Drift.
Today on Business Casual, David explains the pros and cons of starting a business in each stage of the economic cycle—we’re covering everything from hiring and fundraising to creating products for the next generation’s needs.
Kinsey Grant, Morning Brew business editor [00:00:07] Hey, everybody, and welcome to Business Casual. It's me, Kinsey Grant. I'm jazzed for this interview. I know you're jazzed for this interview. So, let's get into it. [sound of a ding]
Kinsey [00:00:15] In 2019, there were 30.7 million small businesses in the U.S. That's 99.9% of all American business. I'm sure every single one of those businesses' founders thought that they would make it big, be the next Facebook or GM or Coca-Cola. But, that's not how the world works. In fact, about 20% of new businesses don't survive their first year in good times. Not sure if you've been reading Morning Brew lately, but we're not exactly in good times. In fact, we are in a recession that started in February, if you're listening to the National Bureau of Economic Research.
Kinsey [00:00:51] But entrepreneurs are kind of like cockroaches. It takes a lot to wipe them out. So today, we are going to talk about whether this moment in economic history is, in fact, a good time to start or grow your business. And here's why. Like we talked about last episode, some of the most successful companies of this era were founded in the wake of the last recession. Is that a sign? Maybe a sign that recessions and bear markets breed innovation and entrepreneurship? I'm hoping to find out. So I am bringing in an expert, entrepreneur, investor, and serial founder, David Cancel. David, welcome to Business Casual.
David Cancel, serial founder [00:01:26] Thanks for having me. Excited to be here.
Kinsey [00:01:28] We are excited to have you. I'm going to run down a list quickly, sort of your CV. Just the highlights. Founder and CTO of Compete in 2000; it was acquired. Founder and CTO of Lookery in 2007, then it was acquired. Founder and owner of Ghostery in 2009, then it was acquired. Founder and CEO of Performable in 2009; it was also then acquired. [chuckles] So I'm kind of picking up a theme here. You are now the CEO of Drift, a conversational marketing and sales platform. I've got a feeling what might happen to Drift, if history is any indication. [laughs]
David [00:02:04] No more acquisitions.
Kinsey [00:02:06] No more acquisitions. So you're done. You're out.
David [00:02:08] I'm done. I'm done. I think we build Drift to be a standalone company for a very long time.
Kinsey [00:02:13] OK. OK. So that is one of the successful types of exits, I suppose, in some capacity. But you've started companies in good and bad times, objectively good and bad times. I said 2000, 2007, 2009, and then the good times [laughs] after that. So we have a lot to talk about today in terms of answering this big question of when is a good time to be an entrepreneur. So, let's get started.
David [00:02:36] All right.
Kinsey [00:02:37] All right. So, a comment we hear time and again on this podcast is some of the best innovation and the best startups are born during recessions or bear markets or economic downswings. Do you agree? And why or why not?
David [00:02:51] Given my history, like most of my companies that you just listed, all of them, except this one, was started in kind of down markets, or at the beginning of down markets. And so, I only know that version. I think great companies get started at any point in these cycles. But that when there's an up market like we've been in for a long time, definitely when I started Drift, there is a lot of people, it's kind of like a gold rush mentality, a lot of people come in. They want to start companies.
David [00:03:17] I'm not sure why they're starting companies, and especially now, we live in that kind of cult of entrepreneurship. That wasn't the case in the past. And so, bad times like we're going through now actually weed out people. And basically the people that are left are the people that are really driven and really crazy enough to want to start a company during these times.
Kinsey [00:03:36] Yeah, it's an interesting concept of sort of separating the wheat from the chaff in a way a recession can, with both business models and, I would argue, founders as well. You have to be a certain kind of person to be able to build a business when things are tough, when the shit hits the fan.
David [00:03:50] Yes. [laughs]
Kinsey [00:03:50] You want to be out there doing something, building something. That says a lot about a person, I would say.
David [00:03:54] I totally agree.
Kinsey [00:03:56] So we'll talk some about this specific COVID-induced recession in a little bit. But I want to talk about economic downswings more broadly in terms of starting a business right now. Was it harder or easier in your experience to start a business in a recession or a bear market?
David [00:04:13] For me, it was easier. I think it was easier in those times because we weren't competing with all this noise. We weren't competing with everyone being recruited away. We were really focused and really had the opportunity to start a company when we were laser-focused on something. We didn't know if we were going to succeed and the people that actually showed up and wanted to be part of it were really people that were into the idea, into the company or into really wanting to get down and do something versus it being in vogue, which it has been until recently.
Kinsey [00:04:44] Yeah, you definitely have to want to give it your all if you're joining a team. It's risky to join a startup at any point in your career or the economic cycle, even. But, when you're joining in, say, 2007, 2009, you really, well, maybe more 2009, there's no guarantee. There's always no guarantee. But there's maybe a little less guarantee at that point. I think that that also speaks to the kinds of businesses that are started during recessions or during bear markets. These are businesses and business models that are created out of need, not just because, like you said, it's in vogue to start, you know, a D-to-C, you name it, company. You're creating something because there is a need for it.
David [00:05:22] Yeah. Yeah. One thing that I find funny is that a lot of people would ask me, you know, in recent history, about how to be an entrepreneur or entrepreneurship. And I said, frankly, I don't know, because I never aspired to be an entrepreneur, because when I grew up and most of my career, entrepreneur was code for "can't get a job," aka loser. It was not something that was glorified. [laughs] It was not something that anyone wanted to be. And so there was really a focus on wanting to start a business and serve a particular type of customer that drove me.
Kinsey [00:05:52] Interesting. Yeah, it's kind of a badge of honor now. We were talking in the last episode to have had a failed business. [laughter and cross-talk] That is something that people on Twitter love to brag about. Here's a thread of all the lessons I learned when my business went belly-up. [laughs]
David [00:06:06] Yeah, I don't want to learn any of those lessons. [Kinsey laughs] This is hard enough.
Kinsey [00:06:09] Neither do I. The success is hard enough. We don't need to think about the failures. So, David, with all of this in mind, do you think that there is a perfect time to start a business? To me, it kind of sounds like, my mom always says there's never a right time to have a baby. [David laughs] The time happens and there's always something that could get in the way or something that makes it not the perfect time. Can the same be said for starting a business?
David [00:06:32] Totally. I love your mom's wisdom, because that's as smart as it gets. And I think, for me, right now is an amazing time to start a business, not because of a down cycle, but because we've gone through this massive disruption. And so, all of our lives, everyone listening, all of our lives have been changed upside down. We've adopted new habits and new realities, and some of those will stick and some of those won't be in the future.
David [00:06:55] But I always say the time that you want to start a business is when there's massive shifts in user behavior. And that's what we've all gone through, because that creates new opportunities, new markets, and new ways to look at existing markets. And so, like right now, all this massive disruption means this cannot be a better time to start a business regardless of the economic cycle. Right now is the time that people should be thinking about starting a business and really thinking about how their lives have changed and what new kind of habits you've adapted. Because it's so hard for people to adapt new habits. We've been forced into—you had the adoption rate now. So right now is the time to think of some new products and company ideas.
Kinsey [00:07:38] It's less about is GDP contracting or is the Dow down 20% from an all-time high, but how are people's behavior changing. How are consumers shifting the way that they look at the world? I want to talk about what those shifts have looked like in the past couple of months. But curious about the historical context here. Let's say that the last recession, and the Great Recession, what were the behavioral shifts then that created this sort of hotbed for innovation that we hear about all the time? We hear about Uber and Airbnb and companies like that being started during this time. What was the shift that induced those innovations?
David [00:08:15] Totally. So if you think about 2007, 8, you know, kind of recession, eight, nine recession, what happened then? The introduction in the iPhone? So we went from a world of flip phones and what have you to the first introduction of the iPhone. And then Android came soon after that. And all of us went from a world using a phone or barely using a phone or using a phone like a phone to actually using the phone as a platform. And that, as that scaled into recent history, now you see, because of those adoption rates, massive ability for us to rethink how we bring products to market.
David [00:08:55] And you mentioned companies like Uber, Airbnb or what have you, Facebook, etc. Those were all powered because of this shift to mobile that happened in the last recession. That was the big thing. It was not the swing that happened from an economic standpoint, but it was like a massive disruption, massive adoption. You use a behavior from everything from new apps to all of us moving from phone calls to defaulting to messaging now. We all message now. Messaging as technology has been around my entire career, which is a really long time. But it wasn't until this came along that we all started to default to messaging, which introduced some new opportunities, including our opportunity to start Drift when we did.
Kinsey [00:09:36] So that would mean that, in theory, a hotbed of innovation, like I mentioned before, could happen in a bull market and in an economic upswing. It just happens that this giant technological shift took place right around the same time as a recession.
David [00:09:51] Exactly. Yeah. And it's funny how that happens. There's usually a pattern around that. And so, you know, the last recession before that, the big one was the dot-com crash. And so what happened then, right, the introduction of the internet. So many commercial internet, I should say, and so many companies that went out of business. A lot of those ideas have been brought back to market. We had companies that looked a lot like DoorDash and Uber Eats and stuff like that in 2000. But the time wasn't right because from a user adoption standpoint, and it took 20 years of adoption to get to critical mass and the introduction of phones, so another paradigm shift for companies like that to be relevant and to be able to grow as big as they have.
Kinsey [00:10:31] Timing is such a funny thing.
David [00:10:33] [laughs] It's everything.
Kinsey [00:10:33] It's so important in all of this.
David [00:10:34] Yeah.
Kinsey [00:10:34] And, you know, we talk a lot about increasing your prospects for being lucky on this podcast. I think that so much of it is out of [laughs] our control. You know, we can do everything—we can be smart and we can be entrepreneurial and try to be the best versions of ourselves. But also at the same time, a lot of it is just timing.
David [00:10:53] 100%. And that's why I've changed the way that I think about starting companies and think about building products. For me, it all comes down to now a totally different approach, which is I start with what are the big shifts that are happening in the world? What are the changes in human user behavior? What are those disruptions that are happening? And try to figure out how do we use one of those, or a series of, or multiple disruptions to actually re-segment, rethink an existing market.
David [00:11:22] And so that's how we've gone to market. I think that's the best way to do it, because then you have wind at your back. Then you don't have to fight to adopt, to get people to change or to adopt a new user pattern, which is almost impossible. You really are using a shift to kind of fuel the thing that you are bringing to market.
Kinsey [00:11:41] Absolutely. Let's pivot here for a second to talk about some of the economic fundamentals that are at play when all of this good timing falls into place and you have a great idea and you're thinking critically about the world around you. What makes a recession, from the economic standpoint, a good time to start a business? Are there any fundamental reasons why it would be a good idea to start a business during a recession?
David [00:12:02] For me, it's really the ability to stand out, both from a talent standpoint, from a recruiting standpoint, and also from an investment standpoint if that happens to be the path you go down. So the ability to stand out, because fewer companies, less noise there. And I think it gives you, in some way, even though your runway is short, it gives you more time. More time to focus because again, you're not competing with all of this noise and all these different companies that are starting and trying to compete at the same time.
David [00:12:30] It gives you more time to actually be thoughtful about what you're bringing to market and actually be forced into a situation that you are bringing something of value from the very beginning because you have no choice. You have to make revenue. You have to actually get customers. You can't just float on momentum like you can in bull markets.
Kinsey [00:12:50] What about what makes it a bad time to start a business, what were some of the hardest parts of starting a business during a recession?
David [00:12:56] Well, the flip sides of those, right?
Kinsey [00:12:58] Yeah. [laughs]
David [00:12:59] Flip sides of those.
Kinsey [00:12:59] Now tell me all the bad stuff. [laughs]
David [00:12:59] Yeah. [laughs] Being able to raise capital is hard. So there's less money available in most—we're not experiencing that in this cycle, but usually there's a lot less money going on. There's a lot less from a budget standpoint, from a customer standpoint. So you're fighting more to get that dollar. But it's kind of like a reverse—it's kind of interesting because on one end, you're fighting more, on the other end, you're building a better company in most cases because you have to go through that fight. You have to go through that uncomfortable period and you're really forced into finding something of value.
Kinsey [00:13:33] Do you think that that makes for a stronger business down the line?
David [00:13:36] You know, who knows? But I think for me, it feels like it has because we had more time to actually sit and be focused. We had to really make sure that we were bringing something of value. And so we built a better foundation for a business. I don't know if that correlation exists for everyone else, but in what I've seen, in the companies that I've been a part of and the companies that I've invested in, that has been true.
Kinsey [00:14:02] OK. I'm interested to hear about the importance of market optimism in general when it comes to starting a business at any given point during an economic cycle. Right now, we are obviously living in what can only be described as a simulation, [laughter] like everything is crazy right now.
David [00:14:20] Totally.
Kinsey [00:14:20] We have evidence that we are in a recession and the economic indicators are not strong right now or not as strong as it used to be. But at the same time, the stock market is reaching new highs just about every day. What matters more when you're starting a business in terms of marketplace optimism? Is it the economic fundamentals or is it that people think the stock market only goes up? What matters more as a founder?
David [00:14:43] Well, I think for me it's a different kind of optimism, which you need to have as a founder—that you need to have, you know, delusion and you have to be a little delusional a bit. And the team that you put together, that actually is building this thing, has to have that shared delusion. Because otherwise it's too hard. You have to believe that there is this rainbow, this ability to get to this end of the rainbow nirvana place that you can build, and some of them has to do with market opportunity, I guess.
David [00:15:14] If you go far enough out, you have to believe that the market is going to be strong enough to support the business that you're trying to build and that you're going to get disproportionate reward for doing all of this incredibly hard work and actually building the type of company that you want to, because it's just too painful otherwise not to go into it being optimistic and having this optimism that there is going to be this, you know, gold at the end of the rainbow if you're able to be successful.
Kinsey [00:15:39] Yeah. Nobody builds a business saying that this isn't going to succeed. [laughter] That would be pretty—that would be the wrong kind of delusional. [laughs]
David [00:15:47] Yeah, yeah, yeah. I agree.
Kinsey [00:15:48] So let's talk about the difference between building and growing a business during something like a recession or a recession-adjacent period. How do they differ? What are the biggest differences in your experience of building versus growing?
David [00:16:02] It's so, so different. And I think one of the hard things for a lot of entrepreneurs, including myself in the past, maybe in the future as well, is making that shift. When you're building a business and then later growing a business, you have to become different, especially as a founder, especially as the leader of the company, like different versions of yourself. And there are going to be different versions of your team over time.
David [00:16:27] And that's a hard switch to make because we get attached to who we are and the people around us. And you want everyone who is there from the beginning to be there later in the company. But skills change and interests change. And so, the beginning part, you're really just fighting for one thing in the building stage, which is, you know, if you build it, will they come? Can you actually get people to care about what you're doing? Because I think the default is, you know, one of the things entrepreneurs are nervous about when they're initially building a product is that people are going to hate their product.
David [00:16:59] And I always say that would be awesome if people hate your product. What you want is people to love your product or hate your product, because in either case, there's a strong and emotional reaction to it. And you can get someone from hate to love over time. What you can't do, and the worst thing is to be in the middle, which is indifference. It is impossible to get people who are indifferent to either love or hate. And that is the value of indifference is what you're trying to get out of. And so, that building stage is about that.
David [00:17:28] And then you move to the growing stage and it's a totally different set of problems. You have proved that people both love and hate your product and you're not stuck on that value of indifference. And now, in the growing stage, now you have a totally different, and then later scaling stage, you have totally different set of problems of, like, can you build a big enough market? Is the market big enough or is that just a little small sample? Can we expand to have a big enough market? Can we serve those different types of customers, which you're going to naturally attract? And can we build a team that continues to scale slightly ahead of—not too far ahead of—the demand that you see in the market and constantly doing that year after year, quarter after quarter. That becomes the really tough part.
Kinsey [00:18:10] Two vastly different objectives.
David [00:18:13] Totally.
Kinsey [00:18:13] I love that you bring up the danger of apathy. It is so true. And in any business, not just in creating a startup or being an entrepreneur, I think apathy is a dangerous word for anybody. All right. We are going to talk more about some of this pro/con territory that we're verging on in just a second. But really quickly, a short break to hear from our sponsor. —
Kinsey [00:18:36] And now back to the conversation with David Cancel. David, I want to run through some of these major milestones that we think about when you're starting a business and talk about how the experiences might differ in recessions versus economic upswings. We've touched on some of them a little bit, but one is a big one, and one that I know our listeners are keenly interested in, and that is raising money, fundraising in general. So in a recession, what's the experience like compared to good times, economically speaking? How do they differ?
David [00:19:06] I'll talk in a normal recession. You know, we're in a weird recession right now.
Kinsey [00:19:10] This is a weird one, for sure. [laughter]
David [00:19:12] There's no difference between up and down right now. And getting money right now is as easy as it was during the bull part of this market. So in a normal recession, for me, it's been obviously a lot harder than when it's up, and it takes basically a lot more—you have to kiss a lot more frogs in order to find your connection. And so, in those markets, you're raising, like, an order of magnitude smaller rounds. So you have to do more with less. You have to talk to a lot more people than you do in these kind of markets.
David [00:19:48] And I think, you know, all of a sudden you have this pressure on you of a focus on the model and the focus on how do you get this company to a state where it doesn't need money, whether it's profitability, whether that means that you get acquired. There's basically like a financial lens that's really put on evaluating this business. And in bull markets, every time I've gone through a bull market and raised money, that's been thrown out the window and there's no financial [indistinct]. It's about the dream and how big is the dream and how fast can we expand and how much of the market can we own?
David [00:20:21] And then, in recession times, it turns a lot more towards a traditional type of business, where how fast can we actually make money doing this, whether that means selling the company or getting to profitability or maybe even taking this company public.
Kinsey [00:20:35] So do companies that are trying to raise money during recessions or bear markets, do you think that they can get to that profitable point faster?
David [00:20:44] It depends on their product. I don't know if it's necessarily faster, but I think they have that pressure put on them. And I think the people who tend to start companies in that market already come in with that mindset. And so they're more disposed to actually—or predisposed to actually—wanting to build a business like that versus building the biggest business ever and then weren't worrying about that later.
Kinsey [00:21:06] Yeah. [laughs] The Amazon approach, as we like to call it. [laughs]
David [00:21:09] Yeah.
Kinsey [00:21:10] So what about this specific moment in history? This is a weird one. What makes it so weird?
David [00:21:16] Because the we have the investment cycle, or the investment mentality, of a bull market with the economic reality of kind of a bear market and so no one knows what's going on. As I said earlier, I think we're living in "The Matrix" or some [Kinsey laughs] weird simulation right now. And so, I have no idea what's going on. And, over and over I've been proved wrong in thinking that, OK, now, in the next year and the next six months, things are going to correct a bit. And every time I say that, they actually go in the entirely opposite bizarro direction, which is like they go higher.
Kinsey [00:21:47] Yeah. Bizzaro is definitely the word. [David laughs] It makes me wonder at what point these two are going to be reconciled. Are we going to have some giant reset at which everything makes sense again, or is this just the new normal? And it's such a risky pair of words to say "the new normal." [laughs] But I do wonder, is this just going to be what happens forever? But the money will run out eventually, right?
David [00:22:09] [laughs] You would think so. But every time I think that, there's a lot more money at play and out there.
Kinsey [00:22:15] Ugh.
David [00:22:15] So I don't know. I wish I had a crystal ball.
Kinsey [00:22:18] Huge question mark. It could be an entire podcast series of itself. Let's talk now about hiring. This is obviously a huge part; building your team we've touched on a little bit. But how does the hiring experience differ for you based on where we are in the economic cycle? Where do you find talent? What does that talent look like? How difficult is it to find and to bring on?
David [00:22:37] One of the biggest differences that we're going through, and that has happened to me in the past, is that you put a lot more focus on recruiting people who have experience. And so that becomes a lot more important because you cannot, one, you don't have as much time as in a bull market where you can hire younger. You can hire people that you can train and that you have the luxury of time on your side in order to be able to train those people and get them to the place where you need them to be.
David [00:23:09] And in this kind of market, it's a lot more focused on—for us and for others that I see in the market—on experience. All of a sudden, you need experience because you don't want to learn everything through trial and error. You don't want to learn everything through failure. And ideally, it doesn't mean that it's going to happen this way. But ideally, you're trying to remove some of the risk out of the hiring that you're doing. And so, like for us, it's a big shift away from younger, you know, aspiring, kind of recruiting towards really recruiting people who can bring in some experience and hopefully save us from some painful lessons that we would make otherwise.
Kinsey [00:23:49] It kind of sucks for the people who are just getting started, though. I think about Morning Brew hired me when I had one year, one calendar year of job experience under my belt and has now handed me a podcast and said, do what you want, basically. [laughs] You know, like I was given—someone took a chance and that panned out. And I'm glad that it did. But I just have to, you know, my heart kind of aches for the people who didn't get that opportunity in 2018 and now, two years later, are trying to find the same thing. And people might be a little less willing to take that risk.
David [00:24:18] Yeah, I think, you know, unfortunately, it always happens that way—that the people at the edges are the people that get disproportionately affected by this, and that's the people at the youngest parts of their career and those are the people at those senior, most senior end of their career, like those are the people that companies are less willing to take a risk on because they really need to de-risk as much as possible.
Kinsey [00:24:41] Yeah. So, risk is a huge part, obviously, of starting [laughs] a business. It should be a factor in just about every decision we make, but it absolutely should be a factor in whether or not we're starting a business. Do you think that this, this COVID-induced recession—I know some people are calling it the great lockdown, which is an interesting pair of words—but this COVID-induced recession has meaningfully impacted risk tolerance for possible or maybe future entrepreneurs?
David [00:25:09] I think, you know, definitely. I think that's true. I think people are, in some ways—you know, I stop myself I when add to this because in some ways I think for sure, because people are fearful. And then on the other end, I think like, because of the nature of this recession, where so many people are displaced, it might actually increase the likelihood that they try to actually create their own business. Especially where we are in terms of the cycle of adoption of the internet, where it becomes so easy for anyone to try, and the technology costs are so low, it might actually go the other way. So, I would naturally want to say that it does, and then I think, it may have actually increased the amount of entrepreneurship that there is.
Kinsey [00:25:56] You think about, at a certain point in this past summer, 40 million people filing for unemployment. You would hope that a decent portion of those people want to go out and try something new and start their own business. That's good for the economy. We want that to happen. It's a number of factors, though, that determine whether or not a person can do that. Number one, obviously, is risk.
Kinsey [00:26:14] But I think it would be remiss not to talk about some of the other factors that make a person capable of taking that risk. It has a lot to do with whether or not you can say, can I survive six months without giving myself a paycheck? And a lot of people can't. And I want to draw attention to that. I think oftentimes we assume that businesses just come out of nowhere. But it takes a lot of risk calculation. And also, there are certain kinds of people and groups of people and socioeconomic classes of people who can or cannot start a business because they have a great idea.
David [00:26:45] I totally agree. And I don't know how to help them. But I do think that we are in the part of the adoption of, and the visibility on, the entrepreneurship side, that there are so many easy ways to learn this that don't have to be as risky as there were for some of us starting. There's endless content, free content, whether it's on YouTube or LinkedIn or other platforms or on this platform right now where people have access to information. And so much, when I think about my career, so much of my career, was discovery because there was no access to information.
David [00:27:20] I couldn't find out. I couldn't Google. There was no Google, I couldn't Google anything. I couldn't Google information on how to do anything. And now everyone has access to that information. Things have been flattened. And so, I want to believe that we are in a world now where you don't need to put as much risk as you did in the past when starting a business.
Kinsey [00:27:41] The barrier to entry can, in some ways, be a lot lower than it was for, like you said, without Google. It's hard to imagine, for me, a world without Google. My job is a lot of Googling. [laughs] That's most of what I do, most days, is just Googling and asking people questions that I can't find an answer to on Google. [laughs]
David [00:27:58] Yeah, I know. For all of us now, that is become such a big part of our lives. But I lived most of my life without a Google and without access to information, so I can still remember. I can't believe that there was much of your life without Google, though.
Kinsey [00:28:13] [laughter] We did have those Encyclopedia Britannica.
David [00:28:17] Oh, yeah, so did I. [Kinsey laughs] That's what I used to read all day.
Kinsey [00:28:21] So, we talked a lot about Google. But also Twitter is a huge resource right now for people who are looking to start a business. There are endless threads on Twitter at any given moment talking about the lessons learned in starting a business or failing, like we mentioned before. So I want to spend some time, David, talking about what comes after this simulation that we are living in, how we think about entrepreneurship post-COVID. But first, a short break to hear from our sponsor. —
Kinsey [00:28:49] And now back to the conversation with David Cancel. So, David, some of this conversation has centered on what a business' prospects look like based on what part of the economic cycle it's founded in. I'm curious about this one specifically. This recession specifically. What kind of businesses do you envision coming out of this moment in economic history? Do we have any sort of indication of what they might look like? What kind of innovation we might see? What the priorities might be?
David [00:29:18] Yeah. You know, again, I go back to this idea of massive shifts in behavior. And so we've gone from a world of having to be in person all the time to a world where we are virtual, especially most of us, in what we do all the time. And so there is a whole slew of things, whether in the physical world or in the virtual world, that have to change because of that. There's the obvious things that you think about, which is like, what happens to space? You know, where are we? How do we make the spaces that we're in more comfortable? How do we go from a world of maybe living in cities like you do to moving to somewhere that you have more physical and green space out there?
David [00:29:55] And so there's endless opportunity there from physical infrastructure, you know, housing, even furniture, to all the stuff that you have to do in the virtual world of, like, all of a sudden, to become accessible in the virtual world, you need a good microphone. You need a good camera. You need all this kind of equipment to actually make this work. And a lot of that, as you know, is super-clunky and hard to use and won't be accessible to most people from a price point standpoint or technology standpoint, so there's endless opportunity to make those things simpler, easier to adopt and in some cases, less expensive.
David [00:30:32] And so there's just endless disruption. Even if we don't fast forward a year, five years, or 10 years down the line—most of us do spend our time there—if you just look at right now, present, all the friction in our lives that is being introduced because of this shift and these new behaviors that we're adopting, there's like endless opportunities for products and businesses to be built right there.
Kinsey [00:30:55] I wanted to ask you, David, what you think some of the biggest companies founded in the last recession would look like if they instead were founded now, like around these times. But I think that maybe that isn't the question. It's hard to say what's going to be the next Uber, when Uber was founded as a big disruptor. It was something that took a stale business model and made it better, made it more palatable, made it more accessible for everybody. And it's hard to pinpoint what exactly that is going to be in the next 10 years. What are we going to look back on and say, wow, that was founded in September 2020, and here are all the reasons why that made it a great company. I think it's probably an impossible conjecture to make right now. Interesting.
David [00:31:36] I agree.
Kinsey [00:31:37] But also, I am just kind of curious here. Uber is a semi-successful [laughs] example and there is an [indistinct]; it made a lot of money. It was a huge IPO. Airbnb is also a great example of a company founded in the last recession that is probably now going to IPO. But you think about a company like, say, WeWork, founded in 2010. Do you think that the trajectory that WeWork took would have looked differently if maybe it had been a little harder to get VC money?
David [00:32:03] Yeah, [laughs] absolutely. There are businesses such as that one that maybe never would have been started and maybe definitely would have had a different trajectory because capital wouldn't be, even in today's market where capital is accessible, there would've been a lot more question marks on the amount of capital that a business like that was taking. So I think that would be an entirely different business, not only because of the recession, but also because the behavior changes. We're not in offices anymore. So it'd be a hard, hard pitch to sell this idea of office sharing when no one is going to an office. It would be an entirely different business if it was started today, both from a financial standpoint, but also from habit standpoint. Our habits are totally different from when that business was started.
Kinsey [00:32:45] How do you think, David, the post-founding years—let's say the first two or three years after you started a company—the mentality that you had changed based on when that company was founded. So you start one in 2009, in 2011, 2012, what were you thinking then and what are you thinking now, in 2020, a couple of years out from starting Drift or from leading Drift?
David [00:33:09] Well, I'm thinking about not repeating the same mistakes [Kinsey laughs] over and over again.
Kinsey [00:33:14] Fair, fair.
David [00:33:14] Which most of us do, and including myself. So I think about that. How do I make this one better? How do I actually learn from past failure, both my own, but also collectively from other people that I know until I actually build a better business. So that is one thing. But then there's also within a company, like let's say you [indistinct] a company in 2011 and now it's 2020. What are you thinking about? And I think that so many of the lessons that we learn, and we learn from others, whether it's from books or directly from podcasts or from talking to people, have a context to them.
David [00:33:49] And we forget that these ideas and recommendations and even concepts always have a context to that. And so they cannot be applied at a different context. So, again, like earlier, you asked me about the difference between building and growing, like, those are two different contexts. And so, I always think about, when I'm learning lessons now and thinking about past failures and how to apply them, how to avoid them today, what was the context? And what is the context that I'm in now? And if they're different, then it's almost impossible sometimes to apply a great lesson and a great example to your situation if it came from a radically different context than you're in today.
David [00:34:26] And so that goes back to the idea that we talked about earlier, which is timing matters so much. And context is—part of context is timing. And so, I think a lot about context. I think about even the lessons, let's say, from books that I learned. I'm revisiting a lot of them that I may have read at the beginning of starting this company in 2015 and thinking, OK, my context has changed now. Now's the time that some of those things that I was reading or learning about actually apply to my business, where they didn't apply before. It was just a neat book or an interesting book to read. The context is now. And so I would tell everyone, really think a lot about your context and the context of the lessons that you're trying to apply.
Kinsey [00:35:12] Yeah. Context is king.
David [00:35:15] [laughs] Yeah, it is.
Kinsey [00:35:15] Heard it here, probably not first, but —
David [00:35:15] Not first. [laughs]
Kinsey [00:35:17] I'll take credit for it. [laughs] All right. Well, David, thank you so, so much for coming on Business Casual. This was an incredibly informative conversation. I really appreciate you being so transparent about your own experiences and helping me gain some more insight about the startup and entrepreneurial worlds in general. So thank you so much for your time.
David [00:35:35] Thanks for having me. This was fun.
Kinsey [00:35:43] Thank you so much for listening to this episode of Business Casual. I, for one, am feeling invigorated. David mentioned that when he was starting his companies years ago, there weren't a lot of resources for budding entrepreneurs. But now there are plenty of them. And we want to collect all of them. So tweet at me, DM me, respond to my column. Send me your favorite, best resources for entrepreneurs and people who want to start a business. I will collect them, compile them, and pass them along to you as soon as possible. See you next time. [sound of a ding]