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?
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.
Forgoing pay for 9 months to start the company. That was a big leap of faith and a huge amount of financial risk.
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.
Four risks in the life of my startup stand out for me:
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.
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.
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.
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.