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What are the risks for startup?

Updated: Aug 23, 2021

There are the following major uncertainties.

  1. would target audience be found and accessed?

  2. would target audience accept your value and pay?

  3. can you make profit under the current market condition?

  4. can your business, vision, pay compensation and message draw talents?

  5. could you withstand copycat attacks/

Risks are all hidden. Hence they are risks.
Risks are not taught, and can not be taught.

Many companies started and last for a few yeas and die. There are two main reasons:

  1. They never found business and their value proposition never found buyer.

  2. They can not grow beyond one person's hobby.


Serial entrepreneurs knows that a solo company is going to struggle.

  • it is better to have a solo effort than bad company.

  • a dream of one person is a dream, a dream of two is reality.

A company without business is very common. When startup, make sure you have business, then form a company to conduct the business.

The Value proposition canvas

The Business model canvass


If you think that people would buy things because "it has benefits", then remember you have a long way to go. Make sure your mission is clear and your focus is laser sharp. If you want city to build things because the citizens would benefits, you still need to give economic reasons. Cities are the payer, and they won't pay until they know it has something that benefits the city's growth (tax base).

Of course the citizens would like it. But if the city does not pay, the idea would be a dead one. I am sure a lot of people tried this before.

For something to work, both the end consumers and the business or government have to ALL AGREE.


Startup is easy. The most common reason is only that the entrepreneur is not experienced. But experience only comes from failure. Failure would guarantee experience, and would then guarantee success.

The biggest enemy of a campaign is the founder himself. Founder naivety contributes to the following scenarios:

  1. think the world needs brand new things

  2. think the world is full of problems to fix

  3. think the idea of an improvement would be accepted

  4. think if you do something good people might pay

Basically newbie founder naivety is in three major areas, that is why seasoned VCs insists on someone who is doing the startup the second time. The seasoned VC know that wisdom can only be taught by experience and they don't want to be the one paying the tuition for someone "full of hope".

Newbie founders dramatically underestimate the difficulty and time for doing good.
Newbie founders are most book smart but they think they are smart.

The three problems are:

  1. having limited book and school and technical project and project; [the problem of people who don't know a lot is that they don't know they don't know a lot, this include professors, decorated engineers]

  2. have no concept of the presence and important of market; [they believe person-to-person transactions through social network is scalable]

  3. have no concept of the difficulty of doing good and the tenacity needed of implementing changes.

Let's say, if a startup founder is someone out of school and clever, knows how to code and build an APP, this found (1) does not have business experience; (2) does not have startup experience; (3) does not have market insight; (4) does not know the interplay of human psychology; (5) most have not had a good paying job and is really eager to make some living.

Real knowledge is not broad knowledge, but deep knowledge.

Basically, many founders drastically underestimates the challenges, the difficulty for people to pay, the difficulty to get quality. They do "wishful thinking" and "sensible thinking" - and everything makes sense in their head. But the world thrives on interests and survival. People protect their interests, and impede progress if it is dangerous.

Success in real world is hard. Everyone's interest and livelihood is intertwined. You must negotiate everyone's interest and try to satisfy everyone's interest.

Charity work that bring benefits to the world does not get paid. It is non-profit because the profit is thin. Even for those kind of good, the founder has to dedicate many decades.

Success in the real world is easy. Read the book of failure and master the tests. It is the real world we are talking about, not the school world or virtual world.


Other links to articles about startup failures and how to "embrace" them.

Real cases of startup failures

Top reasons beginners fail

For startup, the first failure is mandatory and it is the success!

Why companies start for 3-4 years before they fail?

Top 10 Indian startups that closed in 2019

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