(FORTUNE Small Business) – Basil Hero plans on being the next Ted Turner. At a time when potential investors are balking and theatergoers are shunning the Great White Way--and despite his Lower Manhattan office building having literally fallen down around him on Sept. 11--Hero moves ahead, undaunted, with his dramatic idea: Broadway Digital Entertainment. Over the past four years Hero has snapped up the digital rights to 320 classic Broadway shows, everything from The Iceman Cometh to a production of The Glass Menagerie starring Katharine Hepburn. Right now, he has a small business on an Internet site, selling tapes of the productions to theater lovers. Ultimately, the 46-year-old Hero hopes to launch an entire TV channel dedicated to Broadway. His hope--nay, his fervent belief--is that the shows will do for his still unnamed channel what Turner's purchase of the MGM film library and the Hanna-Barbera collection did for the Turner Classic Movies and Cartoon Network channels. Namely, turn it into a gold mine.

That may sound far-fetched, but it's not. It's absurd. Consider what Hero is up against. He's trying to break into a medium--cable television--that already has more than 600 channels fighting for space on systems with far less capacity. He's an outsider trying to get a foothold in an industry dominated by a handful of inside players like AOL Time Warner (FSB's parent company) and Viacom. And while there may be people who are passionate about old Broadway shows, his product is hardly what you'd call mainstream entertainment, like professional wrestling. Nor is it likely to be considered a must-buy with the economy staging its own dramatic curtain-lowering.

But try telling this to Hero, and he shrugs. "Niche programming is the future of television, and Broadway is a 140-year-old institution that's one of the best-known events around the world," he says. He's downright blase about the enormous risk he's taking and unabashedly optimistic about success. From his tone you'd think he missed the memo, the one announcing that the Era of the Entrepreneur was going the way of The Fantasticks and ending its long run.

After all, not long ago entrepreneurship was just another career choice--on a par with, say, day trading. Sketch out a scheme, grab some venture funding, and--voila!--you became an instant CEO. But with the poseurs (read: dot-commers) now weeded out, entrepreneurship has returned to its roots.

Now it can be seen for what it actually is: risky business. Especially now, it's only sensible to ask, Why on earth would anyone start another company? Or enter a new market? Or launch a new product? The answer is anything but sensible. It's because--well, just because.

The fact is, those who still burn to start companies are so hard-wired to do so that they barely behold the risk, personal or financial. They visualize everything breaking their way. "Entrepreneurs look at a situation like we're in today and don't see roadblocks," suggests Kerry Sulkowicz, M.D., a psychiatrist and president of the Boswell Group, a consulting firm based in New York City. "They see obstacles as challenges along the way. They have an unbounded sense of optimism." That persists even, apparently, amid a recession.

Then again, there's some logic to operating on internal instinct: Opportunity is not a lengthy visitor, as the old expression goes. Waste a moment pausing to contemplate risk, and the prospect may fizzle. Seizing that moment is an art unto itself. Coffee conqueror Howard Schultz aggressively expanded his Starbucks empire, going from 17 stores when the economy started slowing in 1987 to 272 locations by the end of 1993, when the economy was coming back. As a result, Starbucks' brand perked up everywhere, warding off the competition and brewing up more revenue when times turned flush. Likewise, Wal-Mart routinely uses slumps to gobble up market share.

Other companies see recessionary periods as the perfect time to offer something new. As Apple CEO Steve Jobs said at the launch of the latest iMac computer in January, "We have been innovating while most of the rest of our competitors have been laying off workers, restructuring, and retrenching."

Such tactics, which separate great companies from also-rans, are not solely the province of the titans of industry. Entrepreneurs can be especially ingenious at making the most of down times. "Our biggest mistakes have been made by expanding in good markets, not in bad ones," observes Craig Hall, chairman of Hall Financial Group of Frisco, Texas, a company he founded that recently diversified into making loans to hotels. "Opportunities to build your base are better during difficult times."

Of course, pockets full of funds and a deep understanding of customers help. Add to this a fearlessness in the face of risk, and the chances of coming out on the other side ahead of the horde are vastly improved. "The economy gets good and bad, but entrepreneurs will always be with us," says Nancy Koehn, a Harvard Business School professor who studies the history of entrepreneurs. Despite today's brutal economy, a new breed of risk takers sees this as the perfect moment to get going, or keep growing, or act on the knowledge of where their industries are heading.

For the incurable entrepreneur, even the bleakest days brim with opportunity. As Marvin Weinberger tried futilely to scrape ice off his car windshield with a credit card on a snowy day in March 2001, he had no idea that it was not only the beginning of a dismal business trip, but the genesis of his next company. Weinberger and his partner, Tucker Marion, would spend several days in California unsuccessfully trying to peddle their high-tech toy, " 'the secret decoder,' a kind of electronic wallet for kids," as Weinberger describes it. It was the last gasp for the $150,000 project. It was also his sixth company in 20 years that had petered out, leaving Weinberger staring down an avalanche of debt with only $40,000 in hand. At one point during the raging bull market, he had seen his stake in Infonautics (a homework helper and electronic-library company he had founded) reach $25 million. But Weinberger also watched his paper wealth melt away.

On their long, unpleasant trip, Weinberger and Marion amused themselves with the challenge of inventing an improved ice scraper, one with a unique curve to it. He soon experienced an entrepreneurial epiphany: Why not turn frustration and desperation into invention and salvation?

It's the kind of leap in thinking that just comes naturally to a company builder. "Being an entrepreneur is a genetic predisposition," Weinberger says with a smile. "It was either do this or get a real job, and getting a job was never an option." To him, the real risk in life is having to work for someone else.

With that in mind, Weinberger founded Innovation Factory in Havertown, Pa., to manufacture and market the Ice Dozer. His venture capitalists from the failed e-wallet project told him he could keep the last $40,000, and he got a grant for engineering design from a state organization to fund the business.

Because of manufacturing setbacks, Weinberger completely missed getting his product onto store shelves this past winter. He turned to his old standby--the Internet--for direct sales. Weinberger's last-ditch effort worked: By February, Innovation Factory had scraped up $10,000 in sales. He has also started talking to retail chains, sales-rep firms, and consumer catalogs about carrying his product.

Perhaps, a year from now, Weinberger will be bulldozing other ice scrapers off the shelves. After all, now's the best time to take on your rivals. So argues the founder of Salt Lake City's EBC Computers, who is expanding while his competition is contracting. How come? "The computer industry was shaky, and retailers started to fade," says Eduardo "Edy" Bedoya, owner of the PCs-and-components chain. "That's a good thing, because the weaker competition got weeded out." The upshot: a bigger market for him.

A Peruvian immigrant who landed in Miami in 1985 with $100, Bedoya has opened up two new locations since the recession began a year ago. He's hired 20 more workers, for a total of 70 employees, and rung up sales of $21 million in 2001.

His expansion strategy is unapologetically brash. Bedoya locates his stores only near his competition. His rule of thumb: There must be two to five stores within a mile of the location he's considering, because that proves a market exists. "I study what they sell, and then I bring it in at a lower price," he says.

Bedoya's strategy enables him to undercut his competition and still make a profit. He keeps overhead manageable--his stores are only 1,500 square feet in size, with three to six employees--and he buys for all his stores centrally from a network of Asian parts suppliers on the West Coast and Taiwan, and in Hong Kong. "My competitors hate me!" he says proudly. All of his stores have been profitable from day one, Bedoya says, and he has recouped the costs of each buildout within six months.

That isn't to say that his business has been immune to the economy or the terrorist attacks. During the week of Sept. 11, business dropped 35% from the week before; then it dropped another 45%. "I was really scared," he admits. On the verge of opening his latest store, he hesitated briefly until he saw sales start to pick up again in October, and then forged ahead. "Sooner or later people still have to buy computers," he figured.

Bedoya's commitment to aggressiveness paid off. His latest store opened on Dec. 14, with a line of people waiting outside the door. He plans to continue growing steadily, opening another two stores this year.

Aggressiveness is doubly valuable when it's paired with the resources to back it up. Steve Mattioli, founder of data-storage startup Yotta Yotta, ought to know. Thanks to his well-heeled company, he has been entertaining dozens of phone calls lately. "Are you interested in buying our technology?" his onetime rival CEOs ask. "Are you guys hiring?" comes the cry from others throughout his field.

Yotta Yotta is one of the fortunate players in this once overcrowded market, having closed a hard-won third round of funding in September 2001 to add $26 million to its coffers. Mattioli knew many of his competitors would never be so fortunate. Only 9% of companies eligible for second-round funding got it in the third quarter of 2001, according to analyst group VentureOne. Even more impressive, Mattioli had received almost triple the average of $9.5 million for later rounds.

Unafraid to spend his resources, Mattioli has seized this chance to add breadth and depth to his company's roster. In February 2001, he acquired a division of QLogic, a company that offers data storage over corporate networks, which Yotta Yotta's product enhances. That addition gave Yotta Yotta 11 new employees and the foundation for a U.S.-based research arm (Yotta Yotta's R&D is in Edmonton, Alberta).

Moreover, Mattioli used this economic slowdown to raise the level of talent in his firm, cherry-picking new hires from the now "significantly" loosened job market. "Early in 2000, our space was so crowded that it was impossible to find talented people," he says. Now he's not only getting who he wants but also saving money to boot. "I've had people offering to work for 60% of their previous salaries," he says. These moves have strengthened Yotta Yotta as it prepares to launch its first product this quarter.

Making something from nothing--a product or a business--may not be the biggest gamble that entrepreneurs make in bad times. It can be just as brave to ditch an original vision in an effort to survive in the face of market gyrations. Watching the daily bulletins about California's escalating energy crisis in late 2000 and early 2001--a crisis for which deregulation shouldered much of the blame--Dennis Kelly wondered where to go next with Green Mountain Energy Co. Californians made up a full third of the Austin-based business' customers (60,000 in total) for its electricity from renewable energy sources.

CEO Kelly didn't need the news flash to see that the utility-deregulation movement was flickering out. "At the end of 2000, we were not sure of our survival," says Kelly, now Green Mountain's vice chairman. "California undercut our business model. We had to have deregulation to make it work."

Green Mountain had to adapt--and quickly. But changing the business model was--needless to say--a crapshoot. Green Mountain needed a new way to capture a market while keeping intact its mission "to change the way electricity is made by providing less polluting sources of energy like wind, sun, water, geothermal, natural gas, and biomass." Kelly had a plan, but it challenged the company's very underpinnings: its staunch support of deregulation. According to Kelly, he brought forward an idea that had been kicking around since the company's founding in 1997--utility partnering. Green Mountain could hook up with existing utilities and offer their customers the option of a green energy source. Then the objections started. "It was a huge debate inside the company," he says. "Utility-partnering deals give the incumbent [the existing electric company] an excuse for not deregulating."

Another possibility was afloat in the company: bidding for the right to serve whole communities looking for utility service. "That was also a question of debate" in the company, Kelly says. "If you pick up customers for savings, are they going to stick with a truly different kind of electricity?"

Ultimately, market realities ended the discussion and forced Kelly to act. "There were half a dozen business models similar to ours before California," he says. "And they've all gone away." So Kelly boldly moved Green Mountain past the internal debate and forward into both alternative markets. "It was a compromise of our long-run strategy," Kelly acknowledges. "But we looked at it as a transition over the next five to ten years, until there's real deregulation." In March 2001, Green Mountain won a contract to serve 400,000 customers in Ohio communities. And in December it sealed a partnering deal with Oregon's two largest utilities to become a renewable-power option for their customers. The company is now actively seeking other similar deals, according to Kelly, as well as pursuing individual customers in states such as Texas, which deregulated earlier this year. "To survive and make a difference, you have to be flexible," says Kelly.

Is it still a risky venture? You bet it is. But there's no telling that to Kelly, Mattioli, Bedoya, Weinberger, or Hero--or others like them. They just can't hear it.

ADDITIONAL REPORTING BY SAMUEL FROMARTZ AND MAGGIE OVERFELT