Startups are all about risk.
Taking risk is healthy, if not required, for any successful outcome – be it business or in life. Yet not understanding the risks you are taking (or choosing not to take) is the easiest way to find yourself out of money, out of business and out of a life.
PandoDaily ran a few great pieces recently regarding risk. A few things jumped out at me as I read them (and if you have time please read them yourself, super valuable stuff here).
The first one talked about the Three Main Risks you encounter as you start a company. Those included:
1) Category risk: Is your market large, valuable, and growing?
2) Competitive risk: Are you about to be disrupted?
3) Execution risk: Can you produce legendary results every quarter?
Although all are valuable, I believe the 3rd one is the most important since ideas are a dime a dozen and quality execution means everything. Of course you must start by picking a large, valuable and growing market. You can even take the most competitive angle on the market, and choose to be the innovator/disruptor rather than the traditional business that gets disrupted.
But if you cannot deliver legendary results each and every quarter, you risk losing the war. My thoughts on execution will be left to another post but suffice it to say executing on your idea makes all the difference.
These three thoughts are very important perspectives to take as you set out on your next adventure, and should’t be taken lightly. I would encourage any founder who finds themselves at the starting line of their entrepreneurial journey to take those three points and write at least one page on each point, detailing how you are exceeding what is required to become a great company in today’s markets.
But I want to bring to light another risk you might not even be aware of – The risk not taken. Or better said, how you view your decision to be an entrepreneur in the first place is worth a deeper look.
Andy Dunn, co-founder of mens online clothing retailer Bonobos, penned an incredible post on taking risk, and the possibility of the risk not taken. I cannot do justice here so just go ahead and click the link and take it all in. Good read…
But it gave me pause. It made me thank God I have chosen this life, for better or for worse. I feel at the end of my life I will be incredibly thankful of the lessons, people, relationships, experiences, money and memories this journey will have provided me.
Each and everyday we are presented with decisions, some small and some large. The crazy thing is at the time we probably don’t realize how imminent these decisions will be on our lives, we are usually so distracted and stressed we pretty much look at the immediate consequences of the choice at hand – make it – and go forward with our life.
Yet, as we all know, consequences can have long lasting effects on our life. Simply by punting – not taking the riskier decision – we are holding ourselves back from fully experiencing the world.
Andy talks openly about his struggles during his entrepreneurial journey. I love it because I’ve been there too! He mentions a time where he realized in the middle of a first date the restaurant where they were dining only took cash. Being a founder living pretty much on credit he basically didn’t have ANY cash – he even went to the cash machine during the dinner only to have the machine deny him any money – so he couldn’t pay for the meal. Talk about the worst feeling in the world, especially for a man.
Outside of those crazy broke stories, Andy dives into why we choose to put ourselves through such difficult circumstances, choosing to take risks, ones that probably seem somewhat unnecessary at the time.
The risk is not in doing something that feels risky. The risk is in not doing something that feels risky.
Very little is obvious in the research on human decision-making and happiness. Very few things are proven. One thing that is proven is this: the only regrets octogenarians have are for the risks not taken.
Here’s why: If the risk taken does pan out, it is good. But if it doesn’t — and here’s the key thing — we find a way to justify the failed risk taken as learning.
So here we have probably the best breakdown of why entrepreneurs CANNOT NOT take risks. I always found it funny people loosely refer to entrepreneurship as a disease. I think this gets to the bone of why people have been saying such a thing. We are addicted to 1) winning and 2) learning. And either way, being an entrepreneur we will succeed in our journey. We will either win big – financial, social, societal – or we’ll learn a hell of a lot in the process.
That is why we play this game. That is why we bet our stack of chips on our future, because we simply cannot NOT see what happens and learn from the experience.
You can learn more about business, people and life in general in 4 years of a startup than from any university in the world.
That is why it’s so addicting. That’s why we pull up our chair and are willing to place our next bet, because you never know what card will be flipped next.
I would rather ante up to see, wouldn’t you?