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There are 3 key areas of risk when doing a startup 1) management risk 2) technology risk 3) business model/market risk You could take a risk in a all 3, but fo
by triviatise 16y ago
There are 3 key areas of risk when doing a startup
1) management risk
2) technology risk
3) business model/market risk
You could take a risk in a all 3, but for many people it is appealing to reduce some of the risk. In this case the author is saying reduce market and probably technology risks.
When I started my company we decided not to take technology and business model risks so we started a consulting company. The model is simple, if boring but it allowed me to learn without my mistakes being completely fatal and generates a good amount of cash to fund more risky ideas. The downside is it isnt as exciting. Now that I think I can run a company Im willing to take business model risks, but using technology that is proven.
Most of the YC startups dont seem to take risks in all 3 areas either. Typically just management and maybe business model.
- tuhin 16y agoJust to be sure, what exactly is a management risk? Risk due to founders being naive about business strategies and its complexities?
- triviatise 16y agoNot just about business strategies but how to run a company. How the pieces like marketing, finance, sales, operations etc play together. How to create a functioning and lasting business culture. For example, when we started we had turnover of close to 100% because my partner loved to win. He viewed every hiring negotiation as a challenge to win which started the employee relationship off very badly. Initially maybe you recruit from friends, but how do you create a recruiting process that can feed the engine? How do you price your products so that you have enough gross margin to cover overhead, what is accrual accounting, when do you hire people if you are growing through cashflow etc.