The US economy is substantially driven by consumption. A recession will reduce demand and adversely affect the balance sheets of households. Corporations will get into a cost-cutting mode, and fresh investments will diminish. The cost of capital will rise, and investors will become more cautious in putting new money into projects.
Startups will find it difficult to raise funds. Investors will mark up risk when they decide to invest. It will raise costs for startups forcing them to take a re-look at their business models. With the rise in risk sentiment, investors will want to look at businesses with clear near-time visibility of profits.
In this scenario, startups should start looking at international markets for customers. Expectations are that the US recession will be short but sharp. It could end by the middle of next year. Startups should use this period to test customer demand for their goods and services in the international markets but prepare to enter the US markets as and when the recession ends, and demand re-emerges.