Success

Founder who started NerdWallet amid 2008 crash: Why now is the 'best time' to start a business

NerdWallet CEO Tim Chen

Tim Chen, CEO and co-founder of $500 million company NerdWallet, says he is "weathering the [coronavirus] storm" just like other businesses, but he is still optimistic. 

"There's a real silver lining here," Chen tells CNBC Make It. Chen believes there is opportunity for the next generation of entrepreneurs.

"Now is the best time ever to build a company," Chen says. 

Chen would know: During the 2008-2009 financial crisis he was laid off at Christmas from his job at a hedge fund. Though he was devastated, he took the opportunity to become an entrepreneur, something he always dreamed of doing.

Chen, now 37, says he got the idea for NerdWallet a few months into his unemployment when his sister, who was living in Australia, emailed him a question about finding a credit card with lower foreign transaction fees.

When he couldn't easily find the answer via Google, he decided to create his own list. That list inspired the idea for NerdWallet. Chen spent $800 to cover early start-up costs like domain fees and software.

Today, NerdWallet has more than 10 million monthly visitors and is valued at more than half a billion dollars.

"So arguably the financial crisis was absolutely the worst time ever to start a company, but I actually found quite the opposite," Chen says.

Chen says he soon discovered three reasons why a recession (and now a pandemic) can be a perfect time to launch a business.

Better talent pool

Chen says now its the time to snatch up top talent.

"The cost of great talent drops in recessions and it's actually easier to hire them," Chen says.

And finding better talent for cheaper rates allows entrepreneurs to create a better product for less money, he says.

He also suggests looking internationally for talent. "It can be daunting to get it set up. But once you do and you figure out recruiting, onboarding and operations, hiring internationally is much less expensive," he says.

"If [NerdWallet] wasn't already a distributed workforce, I'd seriously consider [hiring internationally]," Chen says.

Marketing is cheap

Chen says he has already seen ad rates decline drastically during Covid-19.

"So with ad rates dropping, its basically a chance to build your brand for less while we're in recession," he says.

Chen advises start-ups to look for cheaper opportunities on news platforms such as Twitch and avoid the bigger name advertising platforms.

"It's just super hard on platforms like Facebook and Google because they're so efficient and all the big companies are so good at doing quantitative analysis to figure out how to buy and own those ads," he says.

And if you don't have a budget for marketing yet, organic marketing — getting customers to come to your business naturally over time or through word of mouth rather than through paid links — is also a good tactic during a recession Chen says.

In NerdWallet's case, organic marketing was easy during the financial crisis because in the early days, the site focused on helping people do things like figuring out how to get a free checking account.

Less competition

When Chen launched NerdWallet in the beginning of 2009, he says there was virtually no one else was trying to start a personal finance company and existing competitors were too "hamstrung" because they were laying off staff.

In a recession, Chen says, "You don't have to like race against 10 well-funded competitors to go after a market. There's just a lot less competition coming in the next couple years." 

He even believes now is a "fantastic" time to start a travel company of sorts amid travel restrictions and social distancing due to Covid-19 because no one else is thinking about it.

New businesses are nimble

Chen urges entrepreneurs to think differently when developing new businesses or products as the "world is not going to be the same when we come out of this pandemic."

"The advantage that early stage companies have is they're much more nimble and can move much more quickly and respond to these opportunities better than the incumbents who are now currently trying to lay people off or really worry about the future."

But Chen does urge wannabe entrepreneurs to take things slow when launching a new company or product amid a crisis.

"I like to use the analogy of the tortoise and the hare," Chen says.

"The tortoise schemes an edge over the hare during a recession. So there's way less capital being invested into companies and your competitors. And that means you're actually better off slowing down and building a good foundation and thinking about efficiency and scaling efficiently rather than just optimizing for speed and then scaling as quickly as possible."

And he urges start-ups to raise as little money as possible and figure out how to be highly efficient on small amounts of cash.

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