A few months ago, while speaking with Keith Rabois (PayPal, LinkedIn, Slide), I got his thoughts on why the best startups are created during an economic downturn.  I found them extremely insightful and felt they needed to be shared.

Here’s the three reasons he gave [with my supporting thoughts attached]:

1. Pure Brain Power in One Building

The idea that the more “A Players” you can get in a building, the higher the likely hood of success. When things are good, the top talent gets diluted amongst the vast amount of startups and/or work on their own projects.

2. Lack of Derivative Companies

When the markets hot, people are quick to copy models that work. It’s not uncommon to see 3-4 companies compete in the same market once one proves some level of traction.  However, in a down market, this effect isn’t as pervassive leaving the originating companies time to build out a larger footprint.

3. True Entrepreneurs

It’s easy to start a company when the skies are blue - it’s almost like a “hobby du-jour” for some.  However when times are tough, only the “True Entrepreneurs” continue plugging away, creating value and building their dreams.  They don’t stop and get day jobs, they figure it out.

What companies can you name that come to mind that would’ve had these market conditions? PayPal? Google? Facebook? Cisco? Others?

What are your thoughts?

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