What's the biggest risk you've taken while starting up?


5

I'd love to hear personal stories around this one.

I know people who have lived on credit cards for months, incurring quite a bit of debt while they're out looking for funding (big risk). I also have an accountant friend who is waiting for his client bookings to solidify before leaving his normal job (small risk).

So, what is the biggest risk that you've taken while staring up?

Risk

asked Dec 28 '09 at 11:07
Blank
Brianz
223 points

7 Answers


5

I would say at least psychologically the biggest risk was signing on the first full-time employee.

At that point you have more than just yourself depending on revenue from your business to eat and pay rent. The cost of failure feels much bigger.

answered Dec 29 '09 at 05:23
Blank
Oleg Barshay
2,091 points
  • +1 for the weight of other employees that hangs over your head. That feels much worst sometimes than even paying yourself. – Jarie Bolander 9 years ago

3

Forgoing pay for 9 months to start the company. That was a big leap of faith and a huge amount of financial risk.

answered Dec 28 '09 at 12:12
Blank
Jarie Bolander
11,401 points

3

  • Perhaps the biggest risks have been to my health and my family relationships.
  • Last year I took out a loan from my house equity to cover costs for my partner who is working full time on our venture. The tally so far is about $35k. I have a day job and work on this part-time - I will migrate when able. All of the money is subject to loss unless the business can pay it back through revenue.
  • About 11 years ago I left a company to start a software company with an ex coworker. We had no clients and no income and no products. Our plan was to do consulting and develop a product while we paid for that through contract work. I lasted at that for a few months (the problem was my partner's ethics - he thought it was acceptable to double bill since he was "twice as productive as a normal developer". I decided I was not going to be part of that.) At the time it was low financial risk since the job market was really good at the time. I only lost about 5 months or so of income, though it did hurt longer -term because I liquidated stocks to pay for bills and missed the next two years of incredible returns.

The lesson I guess from that one is that there is HUGE risk in partnering with someone you do not know very well - especially if you don't have the same values and vision.

answered Dec 28 '09 at 13:07
Blank
Tim J
8,336 points

3

Four risks in the life of my startup stand out for me:

  1. I launched out on my own just before Christmas with two kids in college and a third getting married in early January. (I was recklessly miserable in my current employment :-)
  2. Signing my first office lease. I was now committed to all kinds of new overhead when just a few years before I didn’t know how I was going to pay my mortgage.
  3. About 5 years after starting up, I shut down my successful consulting firm to focus solely on software publishing. It was terrifying even with my accountants logical argument that 60% of our income was coming from well under 25% of our time developing software.
  4. Hiring my first full time employee. It seemed insane to accept responsibility for someone else when I was still learning to believe that a growing number of new customers would continue to want to do business with us.

We would not be enjoying the success we do today without taking each of the risks that seemed so monumental at the time. Each time the terror of failure was overcome by the necessity of risk to take our startup to the next level.

answered Dec 30 '09 at 03:22
Blank
Keith De Long
5,091 points
  • +1 for some good succinct "milestones" – Tim J 9 years ago

1

Myself and two other engineers working for a Fortune 500 company knew we really wanted to start a high-tech product company, but were not exactly sure what the idea was yet or how we would fund it. To mitigate risks, but to start the "resource allocation" process, we decided we would first start a consulting company to help replace our incomes while we spent extra time on the business concept, the business plan, and getting funding. We also decided that profits (excess revenue after our agreed salaries) from the consulting operations would be saved to provide seed money for product development.

When all three of us quit our jobs, we each put up $3K of seed money from savings to allow the company to get established and pay rent, etc. until it could sustain itself. We also accrued our salaries as a liability against the books until the company could afford to pay us. It turned out that we did not get any salary at all for 3 months until the first real consulting check rolled in. From there it took about 3 more months (month 6 or 7 since founding), until the company had "made good" on our "back pay" since quitting our jobs.

We spent most of the first year of operations simply consulting to stock pile some cash cushion in the company bank account. At the start of the second year, we then started brainstorming and working the product business plan phase of the company as an "in house" consulting project of sorts. It took two years to identify the idea and build a business plan around it before actual development of the product started and then another year from there to raise the initial round of outside funding.....(we were attempting to raise money just as the dot com implosion was occurring, but we did eventually raise money over the course of a few rounds)

Relative to the original $3K investment, it wasn't until about at year 10 since founding that I got that back (plus the capital gains on it of course) when company and its investors had a successful exit via an acquisition of the business.

answered Dec 28 '09 at 13:46
Blank
Tall Jeff
1,406 points

1

I had recently endured being laid off, so finances were taking a hit, when I went to work for a startup. I finally had to leave it after 4 mths as they had run out of funding, but those that are still with it have not had a paycheck since April, but they are hoping that changes soon, but they are almost $1m in debt for back-pay.

I went as long as I could, liquidating stocks and having my mental health take a hit from worry, but then I didn't have a horse in the race, as I was not a founder, so I was just a simple employee.

I do still help the company out when I have time, but I can't concentrate solely on it anymore, and I am working on my own project, to hopefully start my own business.

answered Dec 28 '09 at 13:58
Blank
James Black
2,642 points

1

For me the biggest risk was hiring international employees. Rules are different, expectations are different, there are communication barriers and it's so hard to really know what's going on.

answered Dec 30 '09 at 03:03
Blank
Dane
1,866 points

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics:

Risk