Five Risk Factors
Startup risks can be divided into five broad categories. The first risk is the product risk, which addresses uncertainties with the solution itself. Technology risk falls under this category. Product risk is high if you are trying to build a technology that doesn’t yet exist. The second category is market risk. You hope that people will buy your solution, but how certain are you? Is this an established market that you are re-segmenting or is it an entirely new market? The third risk is financing risk. Undercapitalization is the number-one killer of startups. Do you have enough runway to get off the ground? Will you be able to raise adequate financing? Is it a capital-intensive business? The fourth risk is competitive risk. If you get traction, your competition will not idly stand by as you steal their market share. How will they react to your entry? The final risk is execution risk. Are you the team to actually pull this off? How much experience do you have in the industry, or with startups in general? Do you have a track record of success?
Rate each risk category on a scale from 1 to 10 (1 is no risk, 10 is monstrous risk). Once identified, take action to reduce that risk as quickly as possible. The name of the startup game is reducing your risk to increase your chances for success.
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