Page 195 - 6 Secrets to Startup Success

174 6 SECRETS TO STARTUP SUCCESS

those who are highly successful. Effective entrepreneurs recognize
that some level of risk comes with the new venture territory and is
necessary to create value, but they are not the bold risk-takers that
they are made out to be. They are, instead, in the authors’ words, “re-
lentless managers of risk.” They understand that not all risks are cre-
ated equal, so they identify and prioritize threats that pose the
greatest danger to their venture. Gilbert and Eyring call these “deal-
killer risks,” and wise founders find ways to creatively address these
early in the startup process.

Gilbert and Eyring observe that “when risks are overlooked, fewer
than 15 percent of firms are still in operation three years after initial
funding.”4 An important strategy for lengthening your venture runway
is to identify, very early in your planning process, deal-killer risks that
might stop you in your tracks. These risks usually correspond to fun-
damental assumptions and uncertainties that must play out in your
favor for your concept to succeed—an expectation of strong market
demand, for example, or the availability of key expertise, favorable
regulatory changes, or well-functioning technology. Once you have
identified the handful of key uncertainties to be addressed, you can
then work to reduce the likelihood of their occurring and build con-
tingency plans to deal with them if and when they do occur.

Here are some examples of how successful entrepreneurs have ad-
dressed early-stage risks to clear their runway of potentially venture-
killing obstacles.

9 Market Risk. For enthusiastic founders, the most fundamental
assumption of all is that an abundance of paying customers
will be waiting to buy your product or service as soon as it is
released. These expectations are often too rosy, which means
that the existence of adequate market demand is almost al-
ways a pivotal area of uncertainty for the new venture. You
can mitigate this risk through piloting, prototyping, and re-
lated approaches, as outlined in Chapters Four and Six.
A powerful approach for radically reducing market risk is
to sell your product before you build it. Starting with $1,000
in funds in 1984, Michael Dell, founder of Dell Computer,

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