People starting companies now can choose ideas that lead to profitability rather than "exits" (IPOs and acquisitions). Ideas along the lines of what 37signals does. As long as they do that, one can argue that startups are not any less feasible now than they were last year, as follows. PG's essay of a few years ago on why you should take VC gave as one big reason, Well, you competitors are probably going to take VC (which allows them to progress faster than you can if you do not take VC). The credit crunch makes it harder for you to get VC, but it makes it harder for your competitors, too. Now, what would people do who decide not to found companies? Well, become employees. But the employment market really does get a whole lot more competitive during a big economic downturn, whereas if the analysis I just gave is right, the start-up sector does not (at least the part of the sector in which success is not dependent on an IPO or acquisition does not).
There is a hidden assumption in the above: it assumes that a startup's competitors are other startups, not established firms. Established firms have easier access to credit than startups. (They can fund new lines of business out of profits from existing lines of business, for example, which is a form of "access to credit" for the sake of this discussion, which is about starting new lines of business -- i.e., exploiting new markets.) This is a real disadvantage of startups relative to established firms, and the disadvantage gets bigger because of the economic downturn, but the disadvantage of being an employee of an established firm when lots of job hunters are in the market might get even bigger.
There are ways in which startups have been able to neutralize the funding advantage held by established firms. One big way is to be more agile. "Agility" means adopting new technologies and entering new market more quickly. Changes in technology and changes in markets and potential markets continue to occur during economic downturns.
There is a hidden assumption in the above: it assumes that a startup's competitors are other startups, not established firms. Established firms have easier access to credit than startups. (They can fund new lines of business out of profits from existing lines of business, for example, which is a form of "access to credit" for the sake of this discussion, which is about starting new lines of business -- i.e., exploiting new markets.) This is a real disadvantage of startups relative to established firms, and the disadvantage gets bigger because of the economic downturn, but the disadvantage of being an employee of an established firm when lots of job hunters are in the market might get even bigger.
There are ways in which startups have been able to neutralize the funding advantage held by established firms. One big way is to be more agile. "Agility" means adopting new technologies and entering new market more quickly. Changes in technology and changes in markets and potential markets continue to occur during economic downturns.