As we move into the Holiday season I thought I might point out an often-overlooked aspect of startups: seasonality. More than many other businesses startups can be greatly affected by seasonality for four primary reasons:
Fundraising. Many entrepreneurs think that raising money is raising money; the time of year does not matter. This is wrong. The Holidays (November – January 15) and the summer (June – September 15) can be extremely difficult times to put together a round. During these times of year investors are in family/vacation mode, not deal making mode. Because investors are money guys, their vacations tend to be longer than most. While there will always be exceptions, it’s best to prepare your team and your funding sources to be making the most progress (biggest push) to raise funds during times when deal making is front and center. I’ve heard that most startups should budget six months plus for raising money. Therefore wasting two or three months on unreturned emails while folks are at the beach can be both frustrating and detrimental to success.
Launching. Although launching a product is traditionally not as seasonal as fundraising, this seems to be changing. Many startups are now timing their build cycles and launches to correspond with the mandated time-lines surrounding TechCrunch50 and DEMO. The contrarian in me thus believes there is opportunity outside of the early fall season (namely late fall, spring and late summer) to launch when the competition for PR will be less intensive but the masses not quite in vacation mode, i.e. available to play with the beta.
Employee Morale. We are now entering a tough time for startups — and not simply because of our current economic slump. The Holidays tend to be difficult times no matter the economic horizon. Somehow it seems bills, Holiday gifts and winter vacations conspire to eat into checking accounts at the same time of year. This can be especially difficult on employees who are working for reduced salaries, or equity. It’s probably a smart idea to parse away some cash for a small bonuses or Holiday treats to keep spirits high and productivity up during this time of the year.
Academic Schedules. Summer is often a boon for cash-strapped startups as University vacations offers a crop of motivated interns who can be suckered into working for little more than recognition (note: you get what you pay for). Also the fall can be a time of workforce transition when that spring’s graduating seniors are forced to confront reality and secure a paying job.
Obviously the “ah ha!� moment can happen at anytime and there is never a wrong time to start a business or follow your passion. That said my experience is that some degree of high-level planning and foresight can end up saving companies significant amounts of cash by exposing the company to expenditures during the most opportune times of the year for progress to be made.