Launching In A Slump – What Lessons Can Today’s Startups Take From The Great Financial Crash?

Generals, it’s said, are prone to respond to the outbreak of a new war by employing the strategies and tactics of the conflict that went before. Soon, however, it becomes apparent that a lot of things are different.  

So bearing that in mind, are there any lessons from the deep recession that followed the great financial crisis that can be applied to the economic downturn caused by Covid-19. And in particular, can we learn anything about starting a business in troubled times?  

Chris Zadeh believes the answer to that question is yes. Winding the clock back more than ten years, Zadeh launched his fintech business, Ohpen, in the wake of the collapse of Lehman Brothers. His aim then was to build an outsource company that would administer investment and savings accounts on behalf of client banks. It was an audacious plan at the best of times, but arguably one that was even more difficult to execute in the midst of a banking sector meltdown. 

Today, Zadeh’s Netherlands-based company employs 150 people in Amsterdam and Barcelona, handles 3.5 million accounts for a client list that includes Robeco, Volksbank, Aegon and LeasePlan Bank. And it has its sights set on the U.K. and other European markets. In other words, despite launching in a crisis the company has prospered. So when I spoke to him last week, I was keen to get his views on the reality of launching a business when the economic outlook seems bleak.  

An IT Guy

Zadeh defines himself as an IT guy. In his pre-entrepreneur days working at BinckBank he concluded that processes associated with managing a bank account were more or less the same. Why not then, create an account administration factory? A place to which banks could outsource their administrative functions, rather than doing it themselves.  

Fair enough, but in the wake of the Lehman collapse, this was not an easy sell – not to the banks themselves, nor to funders, nor staff.  

“No one wanted to fund me,” he recalls,” And no one wanted to join me. I was looking for IT people who wanted – if they could – to stay in their jobs. I had 1,000 rejections.” 

But he persevered and it paid off. He found a backer and once he could point to money in the bank, he was able to hire a team. Being in-demand IT people, the prospective hires did require evidence of solvency, however. “They said yes, we will join you, but only if you prove you can pay us. So I had to ask our investor to commit all the money upfront. With no milestones,” says Zadeh.   

Selling the concept to banks – naturally enough threw up a different set of hurdles. The idea of the “cloud” was relatively new as was the idea of trusting an outsider to carry out work previously considered to be core. Again, it was down to making thousands of phone calls. Eventually,  Robeco, said yes. And as Zadeh acknowledges, he wept when he got the news that he had a green light.

Lessons from the Past  

That’s the history. But let’s return to the present day when businesses face a commercial and financial challenge that is arguably even bigger. What has Zadeh drawn from his experience of starting out in adverse economic circumstances.

You could make some broad points here. Crises can create opportunities. For instance, the financial crisis changed the perspective of at least some potential customers and perhaps ultimately made them more receptive to new ideas. But Zadeh says the fundamental building block for his business was getting the right people. 

“You have to hire people who are not critics or naysayers,” he says. “You should try to hire people who get things done, have the right attitude and who are proud to work for the company. You need problem solvers and people who will exceed expectations.”  

This he argues, is a long-term investment. When the crisis passes, you end up with a company that has a very strong culture. “You have a mentality of not giving up,” he adds.  

Zadeh actually talks a lot about the need to avoid “naysayers” and he applies this rule to finding customers. When launching Ohpen in 2009 he tried to identify people on the boards of potential client companies who would be the most likely to be receptive, rather than just a knee jerk “no” to any new concept.”

Also key is the ability to look for the opportunities created by the circumstances. “It’s all about mentality,” he says. “You need to be able to see the opportunity.” He cites the example of companies selling PC equipment to other businesses that are enabling their staff to work from home. 

Looking After Stakeholders 

Looking after stakeholder should be another priority, he says. “It’s very important to look after staff and suppliers. When you’ve started in a crisis,” you know how important that is.  Communication is key – particularly getting the message across that “we are here to stay.” 

So what does that mean in practice? Well, keeping people in the loop. In the case of staff letting people know that the business will do everything possible to keep them on the payroll – rather than acting rapidly to cut costs and jobs.     

Every business is different of course. Not every aspirant entrepreneur will even consider launching when the prospect of a deep recession is so real and present. Others will flounder because the force of economic gravity is just too strong to resist in their sector. But businesses do launch in difficult times and they do succeed. And doing so – achieving something against all odds –  may offer a chance to build a really effective culture.