Managing Startup Risk

Choosing to launch a startup is no easy feat. The idea of investing both time and money into an idea that statistically has more likelihood of failure than success is scary, to say the least.

“ A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.” — Eric Ries

While uncertainty and risk are inevitable to any startup, that doesn’t mean there aren’t ways to at least manage that risk.

Track your dollars

Whether you’re working with a loan, savings, investment from family/ friends, etc., keep very close track of those dollars. It can be easy to get carried away with the products and services you think are necessary for startup success. Premium accounts, a round of hiring, all the “swag” a startup could dream of, you get the point. Spend less time researching where to get branded frisbees and more time tracking where your money is best spent, and you might find yourself moving in a positive direction.

Additionally, tracking dollars isn’t exclusive to the idea that having money is a symptom of success. Whether you have $1 million or $5 million, you’ll most likely end up spending it in the same time frame. All this to say, be smart not only with the money that you’re spending, but the money you’re taking in. Excess in fundraising can make valuation more difficult and your next hurdles even harder to jump.

Test your assumptions

“We must learn what customers really want, not what they say they want or what we think they should want.”- Eric Ries

You might think you understand what your customer wants, but until you test that assumption you’re putting a lot of money into something that someone might not even want.

Test.

Measure.

Learn.

Think before you hire

You’re ready to grow your team to help with your (hopefully) growing startup. Regardless of the position you’re looking to fill, it’s imperative to hire both for skill and for culture. When you’re bombarded with work and searching for someone to bring value as well as alleviate some of your workload, it might seem tempting to hire the first person that checks most of the boxes. We urge you to not do that.

Be realistic with your expectations and budget, and keep culture a key element in your hiring process. It sounds cheesy, but hiring a highly talented employee that also happens to be a jerk will wreak havoc on your company, and deter future top talent from stepping foot into your business. It might prolong the hiring process, but be picky with your hires.

Trust your gut

Startups are a high-stress beast, but it’s best to heed your intuition when the red flags arise. Founders with horror stories (hello, all founders) often tell the tale of the weird feeling they had, but didn’t listen to. Don’t get so wrapped up in the money, the excitement, or the fea, that you lose sense of your internal temperature.

And, if you’re the type to notice nonstop red flags, seeking out mentors or bringing on a trusted advisor is a fantastic resource for founders to take advantage of. Their range of expertise, as well as outside perspective, are resources that most if not all founders should consider.