Extraordinary Returns Come from Change; Risk Cannot Be Avoided

The bigger the leap in innovation, the greater the risk—but the probability of returns growing exponentially is greater as well. A startup with no risk is not worth investing in from a venture capital perspective. Robin: “What really delivers extraordinary returns for venture capital is that the companies we invest in create change. That change brings exponential growth, which in turn produces remarkable returns.” --- We all know that starting a business requires taking risks. But is taking enormous risks really wise? Should you not reduce risk, proceed cautiously, and stick to methods you know will work? That depends on what you want. For a slow-growing business in an established industry, controlling risk is a good strategy. But if you want to open up an entirely new field, surpass all your competitors, and experience rapid growth, risk is something you simply cannot avoid. You cannot eliminate all risk and still stand out in a winner-take-all market. Suppose you choose the least risky path and focus on an idea you know can succeed because you have seen someone else do it and make a good deal of money. That may reduce your risk, since you know the market exists, but it also limits your upside. If you cannot open up a new field, you cannot change your industry. If you cannot innovate beyond the successful examples that came before you, you cannot gain a truly meaningful competitive advantage. Innovation, by definition, means trying something nobody has done before. The bigger the leap in innovation, the greater the risk—but the probability of returns growing exponentially is greater as well. In other words, a startup with no risk is not worth investing in from a venture capital perspective. If the bet you make carries no risk at all and can still make a great deal of money, you can be sure everyone will rush in to see whether they can get a share. The market will become crowded very quickly, inevitably squeezing profit margins. Building a unicorn without taking any risk is therefore almost impossible. Truly great entrepreneurs keep doubling down on what they believe in. They cannot help taking one more step forward. In Nike’s early days, Phil Knight was almost constantly on the brink of bankruptcy. When Nike entered a period of explosive growth, he kept staking everything on the following month’s revenue. He did not know whether he would have enough money to pay his employees the next month, yet he won every time. That made Nike the world’s fastest-growing sporting goods company. If you are not someone who dares to take risks, and do not feel that urge deep down, perhaps you should consider being an employee like me, Robin. #穿越寒冬 #SurvivingAStartup