As a startup founder, learn how you can think about risk and how you can address it. Learn how you can leverage and manage risk with small bets to increase your chances for success.

Ryan Hatch
Head of Product Strategy & Innovation
Andrew Verboncouer
Partner & CEO

Another important aspect of a strong founder's mindset is understanding how you think about risk and how you begin to address it. One characteristic of risk in a startup and product is that it builds over time. Every decision you make, every answer that you get to a question, is either getting you closer to a sustainable business or further away.
And so, as you think about risk, there are two ways to approach it.

There's one way, which is going big - taking one big swing, betting the farm. We've seen founders go this route - they are very compelled by their vision, very compelled by the solution they think that the market needs or some innovation that needs to be in the market, where they max out credit cards, they put their house on the line.
This is very hard for many founders because not everybody is a Steve Jobs or an Elon Musk or somebody who can match a vision and create a market out of nothing. And for most cases, when you think about market creation, it's nearly impossible. And if you have enough funds, you can do it. But for startups that are strapped for resources and time, the market decides for you because you run out of time to iterate.

So we think about getting continuous market feedback by creating small feedback loops with customers and answering a series of questions. And in our mind, there's no such thing as validated, right? Because your customer changes, the market changes, the solutions that are in the market change over time. And so, when we think about validation for us, it's getting to the root of the word. And that's understanding that validation means strengthening. So we're trying to strengthen evidence to support the hypothesis that we have and the ideas that we have, and understanding that building a venture is a journey.

It can take 18 + months to reach product-market fit. And that's why taking small bets and understanding your risks and plotting them - "Hey, what are the riskiest things? Is it something to do with legal? Is it something in how we're going to deliver what we're doing?" And being able to take those losses and stride because, in your startup, you're going to hit failures, so you want to hit them quickly. And I'm sure you've heard that before, but taking really small bets, addressing risk head-on, and having a plan for how you're going to test and iterate.

One example of this, and I always like this example, is a story of this pottery class that was told that they would be graded upon two different ways.
So the teachers split the class into two different groups. One group they said would be graded solely on the quality of their best pot, and the other group would be graded solely on the weight of the pots that they created over time. And so, the first group that wanted to create the perfect pot did a lot of research. They spent a lot of time in art galleries. They analyzed work. They analyzed the science of shapes. And the next group that was graded solely on the weight of the pots created the best pots. And that was because they focused on the process. They focused on failing. They focused on, you know, learning why the pots they created weren't beautiful or didn't hold their shape, or you know, all these myriad of factors that they had to solve to create the perfect pot.

So as you think about risk, it's important to take those small steps in those small experiments that challenge your assumptions and help you learn more and build upon those learnings.