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Pros, Cons of Starting Tech Firm in Recession

Stocks in this article: MSFT GOOG HPQ

Ted Sullivan last summer was kicking around the idea of starting a company that married his tech experience with his love of amateur sports.

He and partner Kiril Savino worked on creating a prototype while both held full-time jobs. Everything changed in October, when, like many, he was "downsized" because of the recession. Rather than seek another full-time position, Sullivan decided to launch Gamechanger.io, the score-keeping and stat-management application, despite the tough times.

"There is no price on the freedom of working for yourself," he explains. "I may have dialed down on anything that was frivolous. And I may be working more than I ever had. But it makes it all worthwhile, even if I'm eating one level above Ramen."

Sullivan isn't alone in launching a tech company in the recession. But before you write that first line of code and think you'll be another Cinderella story like Microsoft (MSFT - Get Report) or Hewlett-Packard (HPQ - Get Report), here are 11 tips to remember:

Go with what you know: Unless you're sitting on a winning Mega Millions lottery ticket, you can't afford to burn through your life's savings or other people's money. Start with a business idea in a space you're familiar with. You'll make fewer rookie mistakes. It'll also be easier to network for advice and to raise cash, says Richard Weede, vice president of communications for rentacarnow.com.

Partner up: They say two heads are better than one. Know what you bring to the company and find someone who makes you a more rounded team. Offering someone else equity in the company is also the cheapest way to get labor. Sullivan came up with the vision for Gamechanger.io, but Savino is building the application. "If I had brought on contractors to even get to the fundraising stage, I would have needed cash right off the bat," he says. "But by working together, we had a rough alpha product to show investors last summer."

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