Depression-proof business models

John Shinal · October 15, 2008 · Short URL:

Can't afford the mortgage? Bring on the entertainment and booze!

 Dire predictions about the fate of Silicon Valley startups are starting to pile up. We first warned you about it several weeks ago. Soon after, an Armageddon-like presentation that Sequoia Capital (See presentation below) gave to its portfolio companies prompted bloggers and VCs to opine on how bad things can get.

Tough times are ahead for a host of young companies, especially those that depend on advertising. At least that's the developing conventional wisdom.

Yet surely not every Web 2.0, social media or new media company is headed for the dust bin. In fact, many online firms that run lean may fare better than their offline, bigger-budgeted rivals if an ad downturn hits. 

Knowing which startups are best positioned to survive is the big question right now. We've got an answer, and it's got nothing to do with burn rates. The best predictor of the coming winners and losers comes courtesy of history.

If you want to know which startups will most likely survive the coming economic hard times, just fire up the Wayback machine and dial in the 1930s. Certain businesses flourish when markets go down and unemployment goes up.

First off is entertainment, especially the humorous kind. Bad economic times consistently produce funny content. Who wouldn't prefer laughing in a darkened theater or entertainment room to looking at bills you can't pay in the harsh light of day.

The 1930s were breakout periods for comedy acts like the Marx Brothers and Laurel and Hardy. Before they broke onto the big screen in the 1940s, Abbott and Costello were honing their talents in burlesque houses and on radio. Comedies not only provided emotional salve during the Great Depression, they were also cheaper to produce than the musicals that had flourished during the previous decade.

Escapist themes were also big, as was making fun of the rich fat cats who got the country into its mess.
Once Busby Berkeley figured out the formula, the musical made a comeback with lavishly-staged numbers that helped people forget their problems. How else to explain the hit song "We're in the Money" from Berkeley's "The Gold Diggers of 1933."

If this pattern holds, online entertainment that provides comedy, music, dance or satire has a good chance of not only surviving but thriving.

One theme that may have a harder time coming back is the uplifting, can-do stories that made Shirley Temple the biggest-grossing star of the 1930s. Generations weaned on The Simpsons, South Park and The Family Guy may find it tough to make the leap from caustic irony to genuine hopefulness.

My guess is that instead of musicals and cute kids, we'll see more professional things like Seth MacFarlane's Cavalcade of Cartoon Comedy and the low-budget stuff on YouTube or Will Ferrell's Funny or Die.

Video games will do well, and we'll likely see more first-person shooter games, as tough times usually bring to the surface that nagging, repressed need to find and kill our collective enemies.

While we're unlikely to see a return of the jingoism of Rambo or Chuck Norris, violent military games will remain hot, especially if the Taliban continue to make gains in Afghanistan or Iran continues to rattle its nuclear saber. How long before we see a game with Venezuelan's Hugo Chavez as the villain? 

Sports and booze are two other safe bets that flourish in good times and bad. What is more escapist than watching team sports? Any startup that helps fans follow their team or engage in their own fantasy sports league will have a ready audience. 

And let's not forget that prohibition was repealed in 1933, just in time to rescue the liquor business from the mob and make it easier for out-of-work men to blow what little money they had at the local tavern.

Of course, hard liquor and beer have been losing the stomachs and wallets of drinkers to wine of late, which means the alcohol revival may be more refined.
Think Crushpad or Snooth.


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Snooth is a social shopping site for the wine industry. User's can use Snooth's powerful search engine to browse 2 million ratings across hundreds of thousands of wines and then link to 11,000 merchant partners (stores and wineries) in 50 countries to make a purchase. In addition, Snooth is a social network. Users can create accounts, see what their friends are drinking, get recommendations and find their 'taste twins' - users with similar palates to their own.

Crushpad, Inc.


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Crushpad is a San Francisco winery where you are the wine maker. Crushpad provides grapes from the West Coast's top vineyards, an industry-acclaimed wine making team and a state-of-the-art winery 100% focused on making wine in small lots. You choose your level of involvement and we do the rest. No matter where you live, you can now make your own wine.