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Why Today's Bullish Economy Is Bad for VCs, But Good for You A stable economy means less competition for scoring investment.

By Sam Hogg

This story appears in the May 2014 issue of Entrepreneur. Subscribe »

I can't wait for this economy to take a dive. Yep, you heard me. That's because my industry, venture capital, depends on it. There is nothing that increases the number of breakthrough startups to invest in like a miserable economic downturn. In fact, nearly 60 percent of the Fortune 500 companies were launched during a down market, according to the Kauffman Foundation.

Bear with me as I explain why this makes sense and is good for you. When everyone is flush with cash and feeling secure in their gigs, inertia prevails; there's no reason to strike out on one's own. In good times, top talent gets compensated accordingly; hell, everyone has a better-than-even chance of getting a raise.

But when the market tanks, that's when bonuses freeze, budgets shrink and futures get fuzzy. It's also when the forward-thinking start talking treason about "what they could be" if they weren't chained to the corporate ladder. At the bottom, ambitious college students searching for a ladder to climb face fewer job offers and start to consider extending their ramen days and building their own companies from scratch. Greeting those brave enough to act on their entrepreneurial aspirations are family and angel investors who are likely spooked by their sinking stock portfolios and are suddenly more open to backing a startup. And that's when guys like me start to take notice.

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