Light within the darkness

As we head towards the worst global recession in 75 years – we look into some of the biggest downturns over the past 150 years – and the billion-dollar companies that were born out of them


The World Bank predicted the global economy to shrink by 5.2 percent in 2020 – the worst performance since the end of the Second World War. Unemployment in the US reached a record peak of 14.7 percent in April 2020, and while it’s fallen significantly since, it’s hard to predict how the coming months will play out – especially as the effect of continued restrictions across the world come to bear.

Yet while it’s clear we’re in for some challenging times ahead, it might not all be doom and gloom; because for some, challenging times herald game-changing opportunity.

Researchers have observed a correlation between recessions and entrepreneurship; a Kauffman study in 2009 found that more than half of the companies on the Fortune 500 list were launched during a recession or bear market, as well as almost half of the firms on the list of America’s fastest-growing companies.

According to Dane Strangler, author of the study and a fellow at the Bipartisan Policy Centre in Washington DC, companies that form in those circumstances are often more resilient and nimble as a result. “There’s this trial by fire idea,” he told the BBC in a recent article. “If you get started in a recession, you really have to scrape and scrimp to make that company successful. You are trying to make it when you can’t get financing, and trying to get customers when there isn’t any demand.”

A quick glance at some of the most successful names in tech confirm the trend; Instagram, WhatsApp, Uber, Dropbox, Airbnb, Groupon and Slack were all formed around the time of the 2008 financial crisis. Facebook got its real growth spurt over that period, while Google and Salesforce launched just before the burst of the dot-com bubble.

It’s not just a recent trend, either; Burger King opened its doors in the midst of a US recession in 1953, while CNN began broadcasting in 1980, when US inflation was at a sky-high 14 percent. Hewlett-Packard came into existence just after the 1937–1938 recession – when unemployment hit 20 percent – and FedEx started shipping parcels just as the 1973 oil crisis hit.

In a recent study on ‘necessity entrepreneurship,’ researchers Frank Fossen and Robert Fairlie put this trend partly down to the higher levels of unemployment that inevitably come with recessions.

Fossen, Associate Professor of Economics at the University of Nevada, told World Finance: “Those who have a job are usually reluctant to give up their comparably stable income to take the risk of starting a business. The unemployed do not have as much to lose, which explains why we observe more entry into self-employment during recessions.”

Fairlie, Professor of Economics at the University of California, believes there’s no reason the COVID-19-induced downturn won’t give rise to new businesses just as the 2008 crisis did. “I think people have more time on their hands right now to think of creative ideas that will grow into successful businesses,” he said. “My guess is that anything to do with tech and online shopping will be the most successful.”

To help inspire hope for the coming months and beyond, we look at five of the all-time biggest companies to have formed in recessions in the past, and how, against the odds, they grew into global, billion-dollar behemoths.

General Motors

Formed: 1908

Background: The Bankers’ Panic of 1907

Current value: $140bn

The bankruptcy of two major brokerage firms and a run on all the banks associated with them caused the 1907 Bankers’ Panic and sent the New York Stock Exchange plunging by almost 50 percent from the previous year’s peak, marking the first major financial crisis of the 20th century. While the event itself was short-lived, the after-effects were to last for the following two years, and become one of the key motivations for establishing the Federal Reserve System in 1913.

It was in this climate that horse carriage manufacturer William Durant bought Buick Motor Company, transforming the ailing, debt-burdened business into the biggest-selling car brand in the US. He founded General Motors in 1908 and a string of several rapid acquisitions followed, including Oldsmobile, Cadillac, Catercar and Elmore.

“Industrial leaders realised that there was strength in unity and diversity,” wrote journalist Gerald Perschbacher in an article for Old Cars Weekly. “In the case of both Billy Durant and Henry Ford, a stringent national economic setback paved the way for the promise of fantastic futures in motoring.”

Not all of the acquisitions paid off; General Motors started losing money and Durant was ousted in 1911. At that point he co-founded Chevrolet, then bought a controlling stake in GM and returned to the company as President in 1916 – bringing the new brand with him in a merger. But it was when Alfred Sloan took to the helm in 1923 that the company got its real growth spurt, expanding internationally and buying Vauxhall Motors and a controlling stake in Opel – which remain its core divisions today.

Now the company has a workforce of more than 160,000 and a market capitalisation of $61bn. It hasn’t been without its hiccups in between, but if ever proof was needed that global giants could be formed at the most unlikely of times, this would surely be it.


Formed: 1911

Background: Sherman Antitrust Act 1910–11

Current value: $28.2bn

1910–11 saw the emergence of another panic, this time caused by the enforcement of the competition-regulating Sherman Antitrust Act. What ensued was a 26 percent plunge in the US stock market. While many businesses suffered double-digit declines over the following year, businessman Charles Flint saw it as an opportunity to merge three existing companies into the Computing-Tabulating-Recording Company – now International Business Machines (IBM). Those three companies had themselves been formed in a recession.

The ‘Long Depression’ of 1873–1896 – caused by a contraction of the money supply following the banning of silver coins and the collapse of several banks – had given rise to the International Time Recording Company, the Tabulating Machine Company and the Computing Scale Company.

They produced equipment to suit the time (literally); “a time clock for recording workers’ hours was needed as industrial production at the end of the century surged,” noted CNN Money. “Also, a tabulating machine was vital during the immigration wave, to tally up the expanding population.” Flint continued to build the company after the merger – albeit by “pulling off scams” with “inflated stock” and “fake capitalisation,” according to author James Cortada in his recent book, ‘IBM History of Computing: The Rise and Fall and Reinvention of a Global Icon.’

But he laid the groundwork for future success; in 1924, Thomas Watson Sr became Chief Executive and rebranded CTR to IBM. Typewriters and computers ensued, and by 1956, revenues had reached $897m, according to IBM Archives. For this reason, many credit Watson Sr with the real success of IBM. “Flint founded C-T-R Company, but I refer to Watson Sr as the ‘traditional founder,” said Peter Greulich, a former IBM employee and author of several books on the company. “Under his leadership, IBM weathered 10 major economic declines, three major wars, and four of the six largest declines in US stock market history. Over time it was Watson Sr who was remembered.”

Yet with brand revenue of $77.1bn and a status as one of the most powerful tech companies on the planet, Flint has clearly left some kind of a legacy – even if the company does look a little different today than when it first launched.


Formed: 1929

Background: Great Depression 1929–1930s

Current value: $130bn

It was in 1929, at the dawn of the worst financial crisis in history, that brothers Walt and Roy Disney rebranded their existing cartoon studio into Walt Disney Productions.

Six years earlier they had set up shop in their uncle’s garage in Los Angeles, creating animated productions including Alice in Wonderland under the name Disney Brothers Cartoon Studio. But it wasn’t until the Great Depression struck that they shot to global fame, following the debut of Mickey Mouse in the short feature film Steamboat Willie.

The pair continued to build the empire, producing animated shorts of Mickey Mouse and playing on America’s need for joy at a time of national depression. They eventually released their first full-length animated feature film, Snow White and the Seven Dwarfs, in 1938. It took three years, 300 artists and 200,000 drawings to produce – and, at $1.5m (around $26m in today’s terms), went several times over budget.

But the risk paid off; it became the biggest-grossing film in US box office history at the time with revenues of $7.9m (equivalent to $141m) in the first year alone. High costs and low margins for the films that followed, including Bambi, Fantasia and Cinderella, led to growing debt, however. But a turning point came in the 1950s, when Disneyland opened in California and gross income ballooned from a mere $6m in 1950 to a whopping $70m in 1960 (according to Bob Thomas’ book Walt Disney: An American Original).

The rest is, quite literally, history. Walt Disney World theme park opened in 1971; Disneyland Paris followed in 1992. And in March 2019 Disney acquired 21st Century Fox in a $71.3bn deal, adding to its growing list of brands and turning the company into the biggest media behemoth in the world.

The company now has 12 theme parks spread out across the globe, a cruise line and a streaming service among its reams of assets. A Disney Imagineer famously once said, “If you can dream it, you can do it,” and this global megabrand has proven the point – even in times of major economic strain.


Formed: 1975

Background: The recession of 1973–75

Current value: $1trn

When OPEC members imposed an embargo on the US during the Arab–Israeli war – causing the price of crude oil to quadruple and inflation to soar – the world tumbled into a deep, 16-month slump. The stock market crashed, with GDP falling 3.4 percent and unemployment hitting nine percent in the US [according to the National Bureau of Economic Research], causing a rather unfortunate stagflation.

It didn’t stop Seattle-born friends Paul Allen and Bill Gates launching what was to become the world’s biggest software company, though. Microsoft was formed in April 1975, against a backdrop of continued high inflation and low economic growth.

Growth was steady at the start: “In 1975, Microsoft had three employees, $16,000 in revenue and one single software product,” reads a statement from the company.

But in 1980 the real magic happened, with IBM asking Microsoft to create an operating system for the IBM PC – MS-DOS. Daniel Ichbiah, author of a 1995 Bill Gates biography, puts this down to Gates’ “incredible powers of persuasion.” “Some of his actions were exemplary,” he told World Finance. “Especially the way he convinced the giant IBM to ally itself with what was at the time a tiny company.”

Microsoft was paid a royalty for every IBM computer sold. In 1986 the company went public to global enthusiasm, leading 31-year-old Gates to be named the world’s youngest billionaire just a year later. In 1990, the company’s revenues topped $1bn for the first time.

Roll on 30 years – and several Xboxes, smartphones and cloud services later – and Microsoft is, as of 2019, a trillion-dollar company.


Formed: 2008

Background: Global financial crisis of 2008

Current value: $100bn

Among the string of billion-dollar success stories to come out of the 2008 crash was Airbnb. But this peer-to-peer rental giant didn’t start with the aim of becoming a billion-dollar company; instead it was a way for roommates Joe Gebbia and Brian Chesky to pay the bills.

In 2007, a design conference was coming to San Francisco and hotel demand was exceeding supply; so they turned their loft into “a designer’s bed and breakfast, offering young designers who come into town a place to crash,” in the words of Gebbia, who pitched the idea to Chesky in an email as “a way to make a few bucks” [the former showed the email at a TED talk in 2016].

They created, bought three air mattresses and welcomed in their first three guests. The initial success spurred them on to turn the idea into a fully fledged business, with the help of a new, third comrade, Nathan Blecharczyk. The start-up launched at SXSW in 2008, but it took nearly a year of investor rejections, a stint on the accelerator programme Y Combinator and a rebrand to ‘Airbnb’ before Sequoia Capital took a chance on the trio and threw $600,000 seed investment into the business.

By 2011, Airbnb was in 89 countries and had one million nights booked on the site. Big-name Silicon Valley venture capitalists poured $112m into the company, propelling its value to more than $1bn and giving it official ‘unicorn’ start-up status.

It hasn’t been without its hurdles since, not least legal battles and a backlash from cities calling for bans, but the company has so far managed to weather the storms, expanding with several new launches and acquisitions, and recording revenues of $4.8bn in 2019.

The pandemic has thrown another spanner in the works; how it performs among investors will be revealed during 2021 in the aftermath of its much publicised and delayed IPO. But if anyone can pull through a financial crisis, it’s surely one that came to existence at the height of the worst global downturn in more than half a century. As the other companies on this list suggest, having origins in recession can prove useful training ground for future turmoil – and when the economy does eventually boom again, those who have endured the darkest times will be all the more resilient for it.