Startups – Taking risk but how much?

Every time an entrepreneur decides to startup, he/she has to take risks. Without risk, where is the opportunity for rewards? All entrepreneurs know that! It’s also a fact that startups (most of them) have limited resources and loads of enthusiasm. While entrepreneurs work hard to get-off the ground, they always face the risk of running out of resources before reaching the threshold. This is one problem that keeps most entrepreneurs awake at night. The chances that a startup runs huge risks that can sink it does not mean it will not take risks. If they don’t they lose the slim chances of huge upside too! Hence with the possibility of limited margin of error – what must entrepreneurs do to ensure they are balancing on the thin line of optimum risk taking?

One of the things entrepreneurs must learn to do is break down their major startup assumptions into smaller experiments – which will ensure that errors are caught when they are smaller and earlier. This reduces the chances of learning too late in the startup experiment that the game was over a while ago. Many entrepreneurs live their assumptions even after they have been proven false. At times they don’t even realize that the assumption is not valid at all. This can be because of numerous reasons – the most prominent one being customer acceptance. Many times this could have been avoided through simple and small experiments with potential customers.

Entrepreneurs must be great risk managers. They must develop the skill of testing potential points of failure early and in small proportions. This helps validate their beliefs and assumptions before its too late or the bet is too big. This is one of the traits of a successful startup!

Happy experimentation with calculated risk taking!

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