Part 1: Why not to do a startup - pmarchive.com  ## Metadata - Author: **pmarchive.com** - Full Title: Part 1: Why not to do a startup - Category: #articles - URL: https://pmarchive.com/guide_to_startups_part1.html ## Highlights - the opportunity to be in control of your own destiny ([View Highlight](https://read.readwise.io/read/01hs0jys5044ra480a9rrpnnms)) - The opportunity to create something new ([View Highlight](https://read.readwise.io/read/01hs0jze8yvfkxrcb1bsfbmc0x)) - The opportunity to have an impact on the world ([View Highlight](https://read.readwise.io/read/01hs0k01bx4v5v5rqmn79jjw6n)) - First, and most importantly, realize that a startup puts you on an *emotional rollercoaster* unlike anything you have ever experienced. ([View Highlight](https://read.readwise.io/read/01hs10tpk93nygmdt0hqjqcryy)) - *you get told no -- a lot*. ([View Highlight](https://read.readwise.io/read/01hs113nydpq6rat714hpw13xg)) - hiring is a huge pain in the ass ([View Highlight](https://read.readwise.io/read/01hs113eg9x0hjr17ek1pm597h)) - *it's really easy for the culture of a startup to go sideways*. ([View Highlight](https://read.readwise.io/read/01hs11gyvw20rg3j18fp3vw9pn)) - Your challenge as an entrepreneur trying to raise venture capital is to keep peeling layers of risk off of your particular onion until the VCs say "yes" -- until the risk in your startup is reduced to the point where investing in your startup doesn't look terrifying and merely looks risky. ([View Highlight](https://read.readwise.io/read/01hs1bzsdj7kewt9zcf98qxy5y)) - *Founder risk* -- does the startup have the right founding team? A common founding team might include a great technologist, plus someone who can run the company, at least to start. Is the technologist really all that? Is the business person capable of running the company? Is the business person missing from the team altogether? Is it a business person or business people with no technologist, and therefore virtually unfundable? ([View Highlight](https://read.readwise.io/read/01hs1c54r8jcsxrrssf616htg0)) - *Market risk* -- is there a market for the product (using the term product and service interchangeably)? Will anyone want it? Will they pay for it? How much will they pay? How do we know? ([View Highlight](https://read.readwise.io/read/01hs1c56fbbjpq4tw8zcpbpbtm)) - *Competition risk* -- are there too many other startups already doing this? Is this startup sufficiently differentiated from the other startups, and also differentiated from any large incumbents? ([View Highlight](https://read.readwise.io/read/01hs1c7gn3apyz7nfz9ta3a6b2)) - *Timing risk* -- is it too early? Is it too late? ([View Highlight](https://read.readwise.io/read/01hs1cejhvxmz17tnjsr14y8vf)) - *Financing risk* -- after we invest in this round, how many additional rounds of financing will be required for the company to become profitable, and what will the dollar total be? How certain are we about these estimates? How do we know? ([View Highlight](https://read.readwise.io/read/01hs1ch237kqnesz41be6ey45e)) - Tags: #invest - *Marketing risk* -- will this startup be able to cut through the noise? How much will marketing cost? Do the economics of customer acquisition -- the cost to acquire a customer, and the revenue that customer will generate -- work? ([View Highlight](https://read.readwise.io/read/01hs1ch4v4a6h5jk1c5w81gd9h)) - *Distribution risk* -- does this startup need certain distribution partners to succeed? Will it be able to get them? How? (For example, this is a common problem with mobile startups that need deals with major mobile carriers to succeed.) ([View Highlight](https://read.readwise.io/read/01hs1ckfrj2bhggzyx39dvxen5)) - *Technology risk* -- can the product be built? Does it involve rocket science -- or an equivalent, like artificial intelligence or natural language processing? Are there fundamental breakthroughs that need to happen? If so, how certain are we that they will happen, or that this team will be able to make them? ([View Highlight](https://read.readwise.io/read/01hs1ckjfbknnwkhxxadbp8aj1)) - *Product risk* -- even assuming the product can in theory be built, can this team build it? ([View Highlight](https://read.readwise.io/read/01hs1cmg0rz8j31ybg9qzjkefj)) - *Hiring risk* -- what positions does the startup need to hire for in order to execute its plan? E.g. a startup planning to build a high-scale web service will need a VP of Operations -- will the founding team be able to hire a good one? ([View Highlight](https://read.readwise.io/read/01hs1cn834fvz6wxqfsdhhwwkf)) - *Location risk* -- where is the startup located? Can it hire the right talent in that location? And will I as the VC need to drive more than 20 minutes in my Mercedes SLR McLaren to get there? ([View Highlight](https://read.readwise.io/read/01hs1cpe193a96hff4tm2mj04y)) - *Hiring risk* -- the best way to address this is to figure out which position/positions the VCs are worried about, and add it/them to the founding team. This will mean additional dilution for you, but it's probably the only way to solve the problem. ([View Highlight](https://read.readwise.io/read/01hs1dmh3bf78ydg2jwzaf2zz2))