With the focus moving off the stunning 778 point drop in the stock market yesterday, this might just be the best time ever to start up a new company.

While starting up a company is scary, there are a number of compelling reasons why you might just want to get started. With the economy slowing down there are a number of predictable effects, as layoff’s loom, and people wonder what just happened to their life savings, retirement funds, kids’ college accounts, or even what is in their checking account, people with time on their hands start doing things. They will spend time looking for a new job and realize that the job market is very tight. There are also some very smart people that are tired of the corporate work experience and just want to go do something that they believe in, not meet goals set by someone else.

One of the biggest outcroppings of innovation happened after the first dot com boom/bust cycle. We ended up with the entire idea of social networking, Facebook, MySpace, Digg, and started an entire revolution in how people got together on the internet. While these companies might have been successful if the dot com boom had continued, they would not have “owned the market” the way they do now if it had not been for the removal of inefficient companies bloated with VC dollars.

The new companies started in a recession, and found that as economic times got better, and they did, and they will again, that they started to own entire niches due to the rabid followership they developed while there were many people with time on their hands contributing content and page views during those hours where you have already spammed 1000 resumes to the world, and still can’t get a job interview. People took those developed social networking skills to the companies they worked at when they got hired, and the major companies didn’t know what to do with them. Now that social networking, blogging, Facebook, MySpace and others are now semi-accepted and important to companies, the revolution in how we share information is now becoming an expectation of top flight employees, they get social networking, and companies get what social networking can do for them.
These are the reasons why.

1. As Jason Calcanis says, 50-80% of startups might get killed off in a recession. This is good because companies that cannot survive in a poor market will open up new avenues for new companies or healthier companies to expand into for their market niche.

2. As companies reduce the number of employees, it is not always the low end employee that goes, usually there is a brain drain at the company, some of the best and brightest will leave as well. Often these best and brightest will go off to do a startup either because they are disillusioned with their corporate experience, or have a deep driven desire to start their own company and start working for themselves.

3. Combine brain drain with the low cost to entry for an internet based company (anywhere from 200 dollars to 12,000 dollars), and a Seattle environment where we have contests like the 72 hour start up program, and support like MIT Venture Lab (Meet the Angel Investors on 02 October 2008 by the way) to network and meet other leaders in the community, taking the risk of starting your own company becomes reduced in people’s minds. If they are already unemployed, and have time on their hands, they will find something to do with that time.

There is a world of opportunity today in terms of platforms and delivery systems that did not exist in 2001, we have social networking sites now, we have a booming and robust industry in cheap cell phone games, browser plug in widgets, web page widgets, and a host of other low cost easy to produce widgets that can help you get started. If you sell 1000 widgets at 15 dollars each, well that just paid back your operating costs, make a dozen widgets, and have people socially vote them popular, and suddenly you have your own company that is doing well in a recession.

People will generally budget for entertainment even in a down economy, they will also budget for low cost programs that help them be more efficient or do something that they really wanted to do. This is one way of getting started, and one way of making a couple of dollars off the work that you do. If you become successful at this, then you are riding out the recession and will have no compelling reason to go back and do the corporate work experience when the recession starts leading to boom times again. If anything your startup might end up doing much better than you had originally planned. The key to making sure you survive the next collapse end of the world shattering event is to make sure the business is scalable. That you can expand and contract according to the economy and what is happening worldwide.

This is the best time to use the time on your hands, and start working on those great ideas now, getting positioned for what is going to be a very tough holiday season, extending well into 2009. If you do this well, you might never go back, and you will end up with a great company, doing good things, and being the leader of the next wave of amazing things that people can do with your product.

Tags: recession, startup, money, time, layoff, things to do, resume, work search, diy, business, widget, plug-in