Startup Risk And Fear

Lately, again, I’ve been thinking a lot about “risk.” Earlier this summer, I wrote a post here about the life of Ayrton Senna. I’m really proud of that post. You can read it here. In the Valley, stories of “risk” grow into legend. Yet as technology becomes more mainstream, and as the Valley and its companies seem to be the only parts of the global economy that are actually experiencing real growth, the line between startup risk and lifestyle gets blurred. I started thinking about this again because I tend to help move a lot of friends and ex-colleagues in and out of jobs. It’s something I enjoy doing, and as a result of many of these instances, I have come to better understand the hopes — and the fears — of what drives people here to do what they do.

One of the striking observations — and perhaps this is naive of me — is realizing the delta between the type of risk actors here “say” they are willing to take versus the actual risk they end up taking. In a nutshell, that delta is huge, much bigger than I would have expected it to be. And, it got me thinking about a more fundamental question: “Why is it that makes others afraid to take on real risk in startups?”

This question lingered in my head all week. Here are the answers I could come up with (so far):

1. Fear of not having money. You know the common concerns — student loans, maintaining a certain lifestyle, wanting to life in the city and not have to move to Oakland to start something new or commute down to the Valley to rent cheaper office space. Startups can turn into a lifestyle, a choice not to enter into traditional corporate structures. The risk folks often do not want to take involve the fear of going into debt, or not having reliable cash flow, or simply not being able to live in a nice place or part of town. Yet, for every 100 folks who fear this, there is someone who quits their stable job, moves out of the city to a not-so-great part of Oakland, grows a beard, and starts a company by living with his cofounders, and tries to build a prototype with his savings before thinking about more elaborate plans.
2. Fear of finding out you may not be that good. Taking on a professional risk always carries the (likely) possibility that one will fail. Usually, these outcomes are binary. In the Valley, the “acquisition” is an example of a failure that is respected by the community, either because others do the math and justify it on those means, or because starting out to begin with is hard enough. No one wants to find out that they can’t do something. In that way, the Valley can be a brutal place. Most things most people do are somewhat interchangeable when you step back and think about it.
3. A fear of leading (credit: Tom Eisenmann, see below). A founder must set direction in the fog, make tough hiring/firing calls, rally the troops after a setback, etc. Not everyone is wired up to do this, and folks who know their limitations may instinctively and appropriately avoid the founder role. Fear of leading is, I think, different than your fear of failure. Great leaders are often afraid of failing. And it’s different than fear of having your judgments called into question by friends/family/former coworkers, which relates to reputational risks.
4. Fear of being perceived in a different light. This comes down to professional reputation. There are many folks who have tried to start company after company and failed, yet they likely could have spent time inside a bigger technology company and made big contributions. We all have free will, so those choices should be applauded but also put in perspective. People may say nice things about these folks on Twitter or in public, but in back channels, the crowd feels a mix of emotions — part respect, part concern, part empathy, part confusion. It is a complicated thing. What if someone is a late bloomer? No one truly knows. So, what stops some from taking on a deeper risk is this fear of being perceived differently, which leads into my final point…
5. Fear of having one’s judgment called into question. So much of what seems to drive reputation and success here are the choices people make in their careers. Work at the right companies, go to the right schools, have the right friends — in a way, some of it is reminiscent of parts of the east coast (where I grew up), just with different inputs. The fear in this regard is nuanced. The fear is about having others you respect wonder about your judgment. You may never hear about this, but the chatter may exist. And, it has longer-term career repercussions. Now, I think the Valley is a more dynamic, malleable, forgiving place than others, but I do hear how many different people talk about the same repeat founders chasing that elusive goal. Maybe it’s a startup that has been a “startup” for too long. Maybe it’s a founder starting his third company and not being able to get the flywheel going — again — because at some point, if and when this person stops, they may not be able to re-assimilate. Of course, they may not want to anyway, but this fear of having your judgment called into question strikes me as a deep motivator, or rather, blocker in taking on risk.

I should be clear and re-state that I don’t think everyone needs to be heroic and take outsized risks. Everyone has their own unique risk profile. What I do think is important is to always remind each other that there are people who — for whatever reason — undertake great professional risk, the kind of risk that may help them go broke or into debt, the kind of risk which may raise doubts about them in our minds, or the kind of risk that makes other wonder about their fitness. I hold those people in deep respect. I may not be able to help them or may not like the products their startups produce, or may not want to work directly with them, but I do think it’s important to stop every now and then and appreciate the risk some are willing to (repeatedly) take.