So why are great businesses often born in tough times? Is this just a buoyant, but potentially misleading thing that people say casually?

There is no doubt founders have much uphill climbing to do during a downturn, and more so during a multi-faceted one like the current period. Many things become a lot harder. Demand could be significantly hit, customers become harder to find, and conversion rates could drop significantly. Funding becomes tight. And it is hard to function at 100% in the face of uncertainty.

Yet, data show that venture returns have been significantly higher on startup investments made during prior downturns. This is partially explained by better deal pricing — akin to asset classes such as public equities & real estate. However, there are additional structural reasons for why great startups are often founded during the depths of recessions.

Here are some enterprise outperformers founded or initially funded during the financial crisis: Zoom, Slack, Github, Twilio, Okta, AppDynamics, Freshworks, Nutanix, Zscaler.

And SaaS behemoths such as Salesforce, ServiceNow, Atlassian, and SuccessFactors were founded/funded in the aftermath of the dot com bust.

So what are the things that help the best startups counteract headwinds during downturns? Here are some candidates:
- Scarcity brings a clearer focus
- Fewer competing companies funded
- Better talent availability
- Adoption rates for some technologies actually accelerate
- Resilience test upfront, before lots of $s deployed
- Fewer ‘tourist’ founders, investors
- Sustainable growth, vs growth-at-all-costs
- A core culture that is resilient, honest, close-knit

Tough times produce (and filter for) battle-hardened entrepreneurs & teams more ready for other challenges