What would an economic recession mean for Atlanta’s tech entrepreneurs?
With the Federal Reserve hiking interest rates in an attempt to curb inflation and with world events remaining chaotic, many forecasters predict the U.S. could be heading for an economic recession within the next year.
How might the downturn affect Atlanta’s ecosystem of tech startups and entrepreneurs?
Dan Drechsel, general partner for Atlanta venture capital firm Panoramic Ventures, looks to past economic downturns of 1991, 2001 and 2008 as a guide.
“Atlanta’s actually been a stable innovation community around those,” he said. “Sure, we go down a little bit, but we typically recover quite quickly.”
Why? He says many Atlanta tech companies and startups are focused on business-to-business sales, which are typically more resilient. He also says the sheer number of tech entrepreneurs produced by the state’s universities also helps.
Drechsel says while there have been tens of thousands of tech layoffs in recent months, most have been in California and New York.
He says he doesn’t expect a potential recession to have a big impact on available capital in Atlanta, either.
“Most investors, once prices settle out of what valuations are for tech companies, are actually fine to invest through downturns,” said Drechsel.
But it’s not just venture capitalists that can be sources of funding. He says major companies – dozens of whom call metro Atlanta home — can support the innovator ecosystem too.
“The health of our Fortune 1000 companies is a big source because they can be buyers of products and offerings,” said Drechsel.
Then there’s government stimulus programs that help provide funding when the economy goes sour.
“Those can help supplement what’s going on in the market and help smooth the declines in demand that an innovation company might face,” he said.
Regardless of how the economy is doing or how much capital is available, Drechsel says a good idea will always tend to rise to the top.
“The resilience of having an important innovation that people want that solves a real problem is ultimately the source of pulling through in a tough time,” he said.