James Tuckerman, Editor-In-Chief, Anthill Magazine

You may have noticed that every second Thursday, over the last few months, I have posted a blog on a topic that explores entrepreneurship. I hope that these aren’t coming too frequently (if they are, I’m sure you’ll let me know).

Over this same period of time, there is one topic that has dominated the media.

You know what it is. I’m talking about the big ‘D’.

No…

Not Depression.

The big ‘D’ I’m talking about stands for…

Distraction!

In a recent interview with BusinessWeek, Google CEO Eric Schmidt was asked whether Google’s strategy would change as the US economy heads into a likely recession.

He replied, “What recession?”

And then went on to say…

Innovation has nothing to do with downturns. A hot product will sell just as well in a recession as it will in a non-recession. Let’s imagine that we invented a better advertising product for television.

What would our revenue growth be for that? Well, you’re into a $50 billion market, so it will be driven not by whether there’s a television ad recession but by what degree we can get people to substitute [our product] for the other.

The strong companies understand this, and during a recession, they invest.

Or take a moment to reflect on the words of Bill Gates:

Even though we’re in an economic downturn, we’re in an innovation upturn.

I’ve been watching the general behaviour and attitude of our readers pretty closely for the last six months, and I get the impression that they (I mean, you) tend to agree.

If you have a hot idea, the economy is unlikely to deter you.

If you’re a young venture, you just might need to bootstrap a little harder (like all quality startups, including Google and Microsoft in their early days). If you’re a more established venture, you’d be mad to not start working on your next big thing now (because innovation takes time and you want to be ready for the next upturn).

A venture associated with Anthill, called (re)innovate challenge, is inviting Australian organisations to form teams and undergo six months of training.

The goal for each team is to develop ideas worthy of spin-off, from wild new products to processes and operational efficiencies.

The program costs $1,650 per team and has already attracted 220 registrations of interest! This one example demonstrates that 220 companies already understand the value of innovation, irrespective of the economic climate.

(BTW - If you’re the CEO or HR manager, get your company behind this initiative. It’s a program designed to make innovation accessible to as many businesses as possible. The goal is to make innovation just a natural part of the employee development mix and make Australia’s innovation capacity absolutely explode! Click here.)

But I digress.

It seems to this not-so-humble commentator that the most harmful effect of this economic downturn on the state of the Australian economy, so far, appears to not be its impact on our hip pockets but on our hearts and minds.

So, if you are feeling stressed (spitting out beads of sweat, rather than gems of wisdom) just remember that many of the world’s most successful companies hit their stride at the height of recession. Just ask Eric, Bill or even Kellogs!

Thems my two cents for the fortnight (otherwise known as my dwindling share portfolio).

By Paul Ryan, Editor, Anthill Magazine

“We feel like the little ray of sunshine. The last thing to fly from Pandora’s Box,” jokes Aconex Chairman Martin Hosking by phone. He’s sitting beside Aconex CEO, Leigh Jasper, who laughs along knowingly. The two men have reason to smile.

Just when it seems as though financial commentators and politicians everywhere have morphed into an army of Chicken Littles stealing wide-eyed glances at the falling sky, Aconex - the Australian information management company servicing the global construction and resources markets - has secured a $107.5m investment from US private equity firm Francisco Partners.

The capital injection will be used to expand Aconex’s product suite, with 50 new software engineers to be hired. The money will also be used to expand into new markets and pursue acquisitions in preparation for a future IPO.

“We’re not looking to break into any dramatically new business but rather add new modules and functionality around the core system,” says Jasper. He would not reveal the percentage of equity surrendered in the deal, saying only that Francisco Partners took less than a controlling interest.

Hosking believes the interest shown in Aconex by several US-based private equity firms demonstrates that there is still plenty of money and appetite for Software as a Service (SaS) companies that are not over-exposed to a single geographic segment.

“We’ve been hearing a lot lately about how the world is heading into global recession. It’s simply not true,” he says. “The European market, the US market and parts of Asia have definitely been heavily hit, but the market is much more global than it has ever been. The markets that we are exposed to, particularly across the Middle East, North Africa and parts of Asia, are not entering a recession. They are doing very well…. The fact that a US private equity firm is prepared to invest so much in an Australian company demonstrates that it is a very global market.”

While investment dollars for early-stage companies are likely to dry up in the coming months, global private equity firms are still eyeing off later-stage, cash-flow positive companies. US firms such as Francisco Partners don’t rely on debt finance; they invest equity money, accessed from well-capitalised institutions such as 401Ks (US retirement funds) and endowments. For these firms, companies like Aconex have become more attractive because they are already successful in markets with limited exposure the carnage on Wall Street.

In February, Francisco Partners purchased Queensland software house Mincom for $315m. And if you were wondering about the bona fides of Francisco Partners, it is enough to say that one of its main investors is Sequoia Capital, the most prescient technology investment firm around. Sequoia has invested in some of the biggest names in tech: Apple, Electronic Arts, Cisco Systems, Oracle, Google, LinkedIn, Meebo, Paypal, Yahoo and YouTube.

This is an exciting deal for Aconex, which took out the Global Growth Award at Anthill’s 2007 Cool Company Awards. And it’s a deal that should give all Australian entrepreneurs cause for optimism in these uncertain times.

James Tuckerman, Editor-In-Chief, Anthill Magazine

We’ve noticed a strange trend in our circulation data these past six months.

Subscription numbers have dipped while retail sales have increased.

It’s all ’swings and round-a-bouts’ to us but it still begs the question: At a time when many business owners are battening down the hatches and pulling their purse strings tight, why are our readers opting for the more expensive option?

It’s been observed that funny things happen to our collective psyche when the economists start talking doom and gloom.

For example, it’s been noted in the past that movie ticket sales increase in times of hardship (When we naturally seek escapism), as do flower sales. (Yup, the type you might buy to perk up the home when feeling blue.)

We often sacrifice the things we need, in place of the small things we want.

There’s another thing worth remembering about recessions.

They’re a great time for investing in yourself, your business and fortifying your place in the market.

Observation #1… Everything is cheap. Great bargains can be found. (In fact, if you want an Anthill subscription for only $29.95 - 40% less than retail - click here and insert the promo code SCREWTHERECESSION. Believe me, just typing those three words feels both defiant and cathartic.)

Observation #2… With all your competitors holding back on their usual marketing activities, now is the time for you to shine. Focus on selling additional value. Use a quiet marketing landscape to widen your funnel. Focus on strengthening existing relationships. Be like Kelloggs! (below).

Observation #3… Finally, tough times are the universe’s way of making you stronger. Invest in yourself. Find optimistic mentors. Get out and about. Talk to people. Talk to yourself. And find new ways of solving problems. If the solutions work for you, there could be a business in it.

If the doomsayers have already got you in a funk and if my three points are sounding like horse-manure, here’s a quaint and true story to consider.

In 1929, Kellogg’s and the leading cereal maker of the time, Post, were in a close race to win the breakfast cereal market. When the Great Depression started, Kellogg’s maintained their advertising spending while rival Post cut back.

Now ask yourself, ‘How many more boxes of Kellogg’s product have been sold long after The Depression ended because someone had the vision to see a time of economic slowdown as the time to pull ahead of competition?’ And what happened to Post!

Thems my two cents. Now reader, it’s your turn.

Any helpful tips, ideas, suggestions, observations on how to profit from a recession?