Tim Draper: Now's the 'best time' to start a business

Timothy Draper

(Credit: Josh Lowensohn/CNET)

SEATTLE, Wash.-- Despite the growing list of toppling multinational corporations, Timothy Draper, the founder and a managing director of VC firm Draper Fisher Jurvetson, told an audience full of Seattle entrepreneurs and investors that right now is the "best time ever" to start a new business.

To illustrate the point, Draper pointed to over two dozen companies that were founded in recessions and depressions including giants like General Electric, Chevron, and Coca-Cola. Also included were more tech-oriented companies like Skype (of which Draper was an investor), Microsoft, Hewlett-Packard, Kodak, and Adobe Systems.

In his keynote address to attendees of WTIA's Fast Pitch Forum & Technology Showcase, Draper made the case that each of these companies had done something to drastically change the way others in that industry were doing business, or that they had created completely new and different categories that solved real-world problems.

Draper noted that existing and established companies are reeling from crunched credit and skittish consumer spending, and that newer technologies continue to make it easier to fill out components of a business that in years past required more staffing and capital. That, and it's far easier to build in these components when starting from a clean slate.

One of Draper's latest ventures, XChange, builds on this idea. It allows investors to put their cash into a venture in return for company stock that can be created and liquidated with far fewer regulations than traditional IPOs. Draper believes this will make it easier for companies to get chunks of funding through stock purchases without having to jump through the hurdles of going public--including the need to hit a certain valuation.

It's also taking an eHarmony-style approach to matching up investors with potential start-ups by taking whatever information both parties have provided about themselves and setting up the meeting. If the "date" goes well, the investing can begin.

XChange is set to open up this fall.

[Everlovin G]

@Josh Lowensohn

FYI, there is no such word as "skiddish."

You likely meant, skittish, which means jumpy, or readily frightened. What, no spellcheck? Bad on you...

[Josh.Lowensohn]

Yeah thanks for the correction, and for not using the large "e-mail Josh" link at the bottom of the story.

[karpenterskids]

hahaha...I think Josh just PWNED you, Everlovin G!!!

[Josh.Lowensohn]

@karpenterskids--naw I got pwnd.

[pw1y]

Skiddish: to be slightly on the skids. I think it fit well

[splendidcrm]

I could not agree more. In fact, I've started a series of articles "A Programmer's Guide to Starting a Software Company and Building an Enterprise Application". You can read it on CodeProject.

http://www.codeproject.com/KB/architecture/splendid-guide-article1.aspx

[ur2sensitive]

What? Start a business with Obama about to tax the world out of house and home? I am going for a nice, steady union job!

[Josh.Lowensohn]

Unless that union job is at Chrysler...

[splendidcrm]

Are you really not going to start a business because you fear the tax man? What is the likelyhood that you would make 250K in any of the first four years anyway? If it is really a concern, then I would suggest that once you reach 249K, you stop selling until the start of the next business year.

[BigGuns149]

While I would agree with him that right now is a great time to start a business due to cheap commercial and industrial property I think it is important to emphasize that it isn't a perfect time for *every* type of business.

There are a lot of very high end merchandise that simply isn't selling well at all where I would be really hard pressed to go into that business right now regardless of how much money I had. You can only profitably sell a product or service for which there is a demand to buy it above a price that you can deliver the product or service.

[fourthirds]

This is sound advice. The recession is forcing everyone to look at their fundamentals to find ways of simplifying the business. Complexity often generates cost and risk, admittedly with the possibility of greater returns, but I feel as though many people are looking for sustainability now, which in my view is no bad thing.

I talk a lot about this on my blog, http://www.fourthirds.com and welcome any comments there.

[David Dudley]

VCs are giving out less cash these days, very few acquisitions are happening, consumers and companies are spending less.. yeah, seems like a *great* time to start a business if your goal is to shutter in a few months due to lack of cash flow.

[idfubar]

The following sentence:

"It allows investors to put their cash into a venture in return for company stock that can be created and liquidated with far fewer regulations than traditional IPOs."

should read:

"It allows (accredited) investors..."