Inside the echo chamber of a startup, days of the week and months of the year generally blend together. When a team is heads down building the company, Tuesday is no different than Saturday. Winter is the same as Summer. It’s easy to forget that the outside world operates on a totally different schedule. This schedule is one that includes something that members of a startup team most likely forgot about long ago — time for vacation, time to unplug, time to spend not thinking about business.
And because startups eventually need the outside world for things like capital, employees, and customers, startups are affected more by seasonality than is generally appreciated. (By “seasonality,” I mean the fact that some times of year are better than others for various aspects of the business.) This is true in various ways for all types of startups, not just those in obvious categories like fashion or travel.
Before diving into all the seasonality considerations that affect startups, I’ll address the inevitable haters. Yes, Facebook most likely would have been able to raise money or recruit engineers during the great depression or an outbreak the Black Plague along Sand Hill Road. Guess what? You’re most likely not Facebook. If you are, stop reading this and get back to being smarter and more prescient than the rest of us. If instead this is the first you’ve thought about how seasonality affects your business, please read on and plan accordingly.
When it comes to raising money, not all times of the year are created equal. In a 2009 blog post, “entrepreneur turned VC” Mark Suster addressed to the existence of seasonality for VCs. “I’m sure I’ll spark the ire of some VCs for saying so, but there is certainly such a thing as black-out days in venture capital,” he writes. “It’s worth you knowing this so you don’t waste your time.”
The “holidays,” which generally span from November 15 to January 15, are officially a ghost town in the world of finance (from Silicon Valley to Wall Street). Even when people are in the office, they’re more likely to be planning their holiday party or upcoming ski vacation than diligently evaluating investment opportunities.
The second worst time of year is Summer, which generally casts its sunny glow over the period from June 15 to September 15. During these months, the beach, the golf course, and the fact that kids are home from school put most investors in family and vacation mode. In Europe, forget it. This is institutionalized “do nothing time.”
Making this issue more acute, well-heeled investors are likely to take longer vacations than the average Joe. Meetings will be unavailable, emails are sure to go unreturned, and investment decisions for all but the most pressing transactions will get shelved until later in the year. All it takes is one or two partners within a firm to be out, staggered across the entire summer, to freeze investment decisions until all-hands can be called to deck.
What this means for entrepreneurs is plan your fundraising and cash burn accordingly. The fundraising process takes time and there’s no reason to bump up against or worse spill over into these dead periods when it can be avoided. There are always exceptions and plenty of entrepreneurs and VCs will likely claim their tales of productivity during these months. The questions becomes, is it the most effective time to raise money and, if not, why risk it?
Aside from cash, one of the most critical currencies for startups is talent. Depending on the experience level of the position being filled, various times of year can be most effective for recruiting. For more senior positions, where candidates are likely currently employed elsewhere, the calendar month most likely has less impact than market conditions and vesting schedules surrounding their current position. As always, know your audience. Also, general rules related to the above vacation periods still apply.
For more junior hires coming out of school or completing their first or second full year at a “real job,” recruiting typically begins in January or February following university winter breaks. These hires can be expected to begin during the summer months following graduation.
One of the best things about summer is the availability of cheap or free labor in the form of interns. While the adage, “you get what you pay for” certainly applies, it has never been cooler to work for a startup than it is today. For any startup that has lots of
filing development to fire through, planning on going heads down during the summer and leveraging interns to do so — when investors and to a lesser degree users are otherwise distracted — could be a wise move.
Okay, so you’ve raised money and assembled a team. When the hell do you show the world what you’ve built? In recent years, the idea of “launching” in conjunction with a premier startup conference has been all the rage. Particularly for consumer facing products, or better yet mobile apps, events like SXSW and DEMO can offer early-adopter rich proving grounds. They can also be the graveyard for the less-enthusiastically received offerings.
Twitter and Foursquare are the poster-children for SXSW launch success, with the former appearing in 2007 and the latter in 2009. Since then, and in the last two years most noticeably, the event has had the opposite effect on the most hyped companies. As our own Erin Griffith reported from the event, 2012 was “The Year Nobody ‘Won’ SXSW.” Most notably, widely-hyped location-aware social networking app Highlight walked away with semi-fatal reports of excessive battery drain and impressions of stalker-i-ness. Launch rocket fuel not deployed.
“With each year, the big ‘win’ is a little less big,” writes Erin. “GroupMe’s bump was smaller than that of Foursquare, Foursquare’s bump was smaller than Twitter’s. This year the bump is negligible.”
Startup evangelist Robert Scoble offered a no bullshit answer to a Quora question about the subject, saying:
“The best launch is if you have a product that other people like using so much that they tell other people about it. There is no real way to get around that. I’ve seen it over and over again. Companies that get lots of PR, like Color, end up really sucking in the marketplace, but other companies, like Instagram, end up taking off like a rocket and never slowing down. They both are photo apps for iPhones, so what did they do differently? One told a better story and had a better strategy.”
The takeaway seems to be that pinning the success of an entire product launch on a single weekend, during which there will be more eyeballs but also more distractions than at any other time, is generally foolish. What may be a more effective strategy is to launch in advance of these events, hope to build a small but loyal following, and use the events as a boost for an already established product.
There may never be a “right time” to start a business. When a moment of inspiration occurs or life gives you an extra push, there’s no need to delay until a “better time.” What is important is to be aware of the external factors that affect the ability of a business to access its critical external resources: capital, talent, and customers. With the right degree of awareness and corresponding planning, adhering to this schedule can be a huge advantage in terms of both time and cost.