Live Issue... Is now the time to launch a start-up?

At a time when budgets are in freefall, deciding to start up an agency might seem crazy. But there is a logic to it. At the moment there are plenty of executives walking round with redundancy payouts in their pockets and with precious few options of rejoining the major agencies. At the same time, many cost-conscious clients are looking for cheaper options. So is now a good time to take the plunge?

Some certainly seem to think so. The Gang has been started by a former executive director at M&C Saatchi Singapore, Richard Johnson. It has been set up to offer value for money by cutting out the frills of agency life. Or as Johnson puts it: “No suits, no fancy boardroom, no expensive office we’re paying WPP back for, no grey-haired men in a regional office skimming the money off the top but not working on the client’s business, and we don’t waste money doing free pitches for new business.”

Two other M&C Saatchi alumni, former Hong Kong CEO Michael Moszynski and creative director Alan Jarvie, also started up London Advertising in the UK, and recently picked up the Mandarin Oriental account. Again, their selling point is built around cost; they claim to offer their work 50 per cent cheaper than the networks by using an internet management system that saves time and money.

But the jury is still out as to whether it is a wise move to open an agency during an economic downturn. Ad agency veteran Kim Walker, who in 2007 started Silver - an agency that targets the over-50s demographic - believes that it is a good time for natural-born entrepreneurs. “True entrepreneurs tend to take such risks and go against conventional wisdom. That’s what defines us: high risk and high reward.”

However, Ian Millner, founder and chief executive of marketing group Iris Worldwide, disagrees. He launched Iris, which now has an office in Singapore and is expanding in China, as a start-up in 1999, based around the account of Ericsson, formerly a client of his previous employer IMP. He argues that that a downturn is not a good time to be starting from scratch. “Many people start up in a downturn because they have no choice,” says Millner. “During a downturn, clients need less marketing and fewer marketing agencies. Clients become more rational, more conservative, and more interested in consolidation around the key drivers of their business.”

Millner and Moszynski agree that executives who have been made redundant and want to invest their severance pay into a start-up may be lacking the drive and confidence to be successful.

“They are the worst people to do a start-up,” says Millner “To do it you have to really want it. If you have a load of money in your pocket, you have something to lose. It is a real calling. Start-ups are usually defined by ‘client-centricity’ - usually this means, in the early days especially, speed and price.”

“It is all about self-confidence,” adds Moszynski. “Someone who has just been laid off might not be in the best state of mind.”

Only time will tell who comes out of this downturn well. “Most start-ups remain invisible in their early years, until they have something to shout about,” says Walker. “We’ll learn about the amazing entrepreneurs born during this economic downturn only a few years from now. As for the failures, we’re unlikely to hear about them at all.”

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