Uncertainty

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How To De-Risk Your Startup

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How To De-Risk Your Startup

Aha, we got you! Actually, we want to talk about the whole notion that you can “de-risk” a startup. We frequently hear founders and investors make a statement like “This is a good investment because it’s already been de-risked.” Or advisors will say, “We can help you de-risk your startup.” This makes us want to remind people about the difference between uncertainty and risk. Risk is probabilistic and can be quantified. Uncertainty is about the unknown. It’s hard to put a probability on the success of a startup. So, moving startups forward requires reducing uncertainty rather than risk.

Let’s work through a more tangible example. On one of our favorite mountain bike trails, there is a set of four stumps.

Startups Need to Understand How the Human Brain Deals with Uncertainty

Startups Need to Understand How the Human Brain Deals with Uncertainty

We’ve said it before, but it bears repeating – being an entrepreneur is not about taking risks, it’s about being comfortable with uncertainty. And let’s just admit that we live in uncertain times. In order to manage this uncertainty, or any of the uncertainty that comes with creating and growing a startup, it might help to understand how we process it.

Let’s start with some of the academic research. Over the last 10 years, researchers have been using functional magnetic resonance imaging (fMRI) to see how the brain responds to different kinds of inputs. People are given different kinds of tasks and the fMRI measures what parts of the brain have increased blood flow. The idea is that more blood flow = the part of the brain that is working the most. What this research has shown is that some ideas that we think of as being on a continuum actually work in parallel. For example, when purchasers evaluate how much they trust a seller, the parts of the brain associated with reward, prediction, and uncertainty are working the most. But when they focus on how much they distrust these same sellers, the active areas of the brain are associated with intense emotion and fear of loss.

5 Tips for Living with the Uncertainty of a Startup

Investors will pressure you to mitigate as much risk in every aspect of your business.  You control for as many variables as possible, but how do you live with so many unknowns?  

Normalizing uncertainty will not only help you succeed with your startup, it will help you become more of yourself and allow you to be fully present with your family, friends, and colleagues.  The following practices will help you develop confidence, deepen relationships with influencers, and get you through those tough times when you don’t have a crystal ball to predict the outcomes in your future.