Entrepreneurs tend to focus on opportunity rather than risk, and rightly so. As Steve Blank has written, at its core, a startup is an organization formed to search for a repeatable and scalable business model. In the lexicon of the lean startup movement, once “product-market fit” has been achieved, the focus shifts to scale and execution as the startup matures into a growth company.
In a sense, risk and opportunity are two sides of the same coin to early stage startups. The huge risk that eclipses all others is that the product or service being offered simply won’t succeed — there is no product-market fit, at least at numbers that would make for a financially viable business — in which case (assuming competent execution) the perceived opportunity, viewed broadly, wasn’t really there to begin with.
Perhaps it shouldn’t be surprising that risk items on which legal and financial experts focus seem like afterthoughts to many startups. After all, if value isn’t created in the first place, isn’t it premature to worry about its impairment? Even at large corporations, legal departments are jokingly dubbed the “Department of Sales Prevention” because of their tendency to insist on the elimination of all risk from deals.Continue Reading