The December 2023 issue of IEEE Spectrum is here!

Close bar

Recession and Layoffs Helped Create a Start-up Boom

Web businesses are growing thanks to low launch costs and plenty of venture backing

2 min read
Recession and Layoffs Helped Create a Start-up Boom

Tech companies had their share of mass layoffs in 2009. While engineering employment took a slight turn for the better last year, many who were laid off during the recession were having a hard time finding jobs.

So, what does one do with a perfectly good engineering degree, experience, talent, and ideas rattling around in their brain? Strategy consultant Sramana Mitra would say “figure out what problem you can solve and go solve it by starting a company.” And indeed, many techies are doing just that.

Start-ups are proliferating in tech-centric areas like New York, Silicon Valley, and Massachussetts. There’s even whisper of a bubble. From

The murmuring started months ago, with early-stage investors moaning about soaring valuations and venture funds shifting their cash toward Internet upstarts. Then a widely circulated dispatch from New York venture capital doyen Fred Wilson yanked the conversation out into the open.

"I think the competition for 'hot' deals is making people crazy and I am seeing many more unnatural acts from investors happening," he wrote last month in an ominous blog post titled "storm clouds."


Wilson avoided using the term "bubble," but others aren't shying away. Angel investor and Wine Library TV host Gary Vaynerchuck thinks a "huge bubble" is inflating. "I'm seeing a lot of companies get $5 million to $15 million valuations now on their first seed rounds that have no anything," he says. "At least they're a little bit more practical than 2000, when people got crazy."

With today’s online tools and open-source software, launching a Web-based business now costs a fraction of what it did a decade ago. “There’s an enormous opportunity for problem-solving using the Web,” Mitra says. She gives the example of Scott Wainner, who started an online PC community forum at 15 and had a thriving business with a six-figure income by the time he started college.

What little money Web start-ups require might be easier to come by today. According to corporate information and research firm CB Insights, top venture capital firms favored the Internet sector in 2010, with a third of internet investment going to social websites (surprise, surprise!).

This is all good news for engineers and developers. With more business ventures come more jobs. In fact, start-ups and established companies are now competing for talent, and mobile developers in particular seem to be in high demand.

The start-up boom isn’t limited to technology. More Americans have launched businesses during the Great Recession than at any time in the past decade and half, according to a recent report from the Kauffman Foundation. Last year, 0.34 percent of Americans started a business each month, creating 565 000 start-ups.

PHOTO: Altaide, Flickr

The Conversation (0)