Contain Risk as Early as Possible

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Entrepreneurs are revered by the public and press as senseless risk takers. They’re renegades who gamble everything on crazy ideas and irrational, futuristic visions. Yes, startups are soaked with risk. There are company-killing pitfalls and dangers everywhere, many of which you might not even know about. You could miscalculate consumer demand, miss the mark on your revenue model, ramp up your overhead too quickly, underestimate the time and cost of development, pick the wrong location . . . the list doesn’t end.

But make no mistake—great entrepreneurs contain risk, they don’t seek it. Great entrepreneurs reduce as much risk, as early as possible and constantly hedge against worst cases. A common way cutting-edge car companies de-risk their new products is through presales. Tesla presold $40 million worth of Model X’s the day it was announced. How’s that for containing risk?

Make it your mission to identify risk and attack it head on. Don’t be afraid of risk; eliminate it methodically. Enumerate your assumptions in order of importance and knock them off, one at a time. The fewer assumptions you have to make going forward, the lower your risk. In the worst case, you identify a deal-killer and move on to the next idea, saving yourself months (or years) of struggle. In the best case, you greatly reduce the time it takes to build a thriving company. ...

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