In spite of all the doom and gloom about the downsizing and bankruptcies of many companies, we must remember the role that new and innovative start up companies play in growing our economy out of this recession.  At this week’s Venturefest event in Oxford many high growth companies, investors, and government supporters gathered to learn how to be successful in this market.  What emerged from the presentations and discussions were several key success factors for start ups.  Now more than ever, investing in entrepreneurship is important to create new technologies, jobs and economic growth.  The UK government has recognised this and just launched a new £150 million Innovation Fund that is intended to grow to £1 billion to help fund early stage companies.  While the recession is very difficult for many, now may be the best time to start a new venture, according to the Kauffman Foundation’s new report.

While most of the fundamentals of running early stage businesses have not changed like securing top talent, inventing new products or services, then bringing the innovation to market by commercialising the opportunity, at Venturefest there emerged several key success factors that are unique for start ups in today’s economy. First, early stage companies must remember to stay close to their customers.  Most early stage companies that are succeeding today have a very targeted view of the market and can quantify the market opportunity and ROI of their investments.  Successful companies keep analysing the market, speaking to customers to validate their model, then monitor key performance indicators to stay on track.  It is also critical today to keep important customers or partners loyal so invest in these relationships.  Also, given that so many companies are having difficulties and going into receivership, many customers are assessing the financial health of suppliers especially in the B2B segment.  Now is a good time for early stage companies to review your balance sheet and your cash position.  Try to have at least 18 months of working capital to show good financial health to important customers.

So, the question is whether this is a good time to start and grow a new business venture.  The recession does offer the opportunity to fine tune your business model to be more competitive as business improves.  And, history shows that recessions or economic downturns often lead to the birth of successful companies.  A new report from the Kauffman Foundation highlights that more than half of the firms on the Fortune 500 list were started during recessions or stock market bear cycles.  Investing time and resources in ventures and innovations sound like a good way to start up the economy.