The Top 5 Risks Confronting Startups

8/23/12Follow @metricstream

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clearly define how much money is needed not just to start the business, but to stay in business. Insufficient operating funds have ruined many a startup before they have even had a fair chance to succeed.

Risk 4: A Lack of Competitive Advantages

As a startup, you’re a small fish in a big ocean. If you want to be noticed, you have to stand out—not just in your offering, but also in your business model and brand positioning.

Zipcar didn’t try to capture the existing car rental market at airports. They sought to create a new market by focusing on young and trendy “zipsters” and not on corporate honchos. Cars were conveniently located, and access to them was automated through a cool mobile app.

You’d hardly expect any of this from a car rental company. But today, Zipcar is the world’s largest car sharing service precisely because it strives to be different from the rest.

You too need to demonstrate at least one single competitive advantage that is central to your business – something that is sustainable and also difficult to copy because, make no mistake, people will try to copy it.

One of Google’s biggest competitive advantages is its search algorithm. Yours might be your intellectual property. Or it could be your existing customer base, especially if you plan to launch a new product or service. It could even be your business team—Steve Jobs and Steve Wozniak were two of Apple’s most prized assets. Whatever your advantage, make sure that it is truly “competitive.”

Risk 5: Impatience and a Short-Term View

Any entrepreneur will tell you that persistence and optimism are critical for starting a business. When Sir Richard Branson launched Virgin Atlantic Airlines in 1984, his critics said it would never last. But it did, despite both the soaring fuel prices of the ’90s and the 9/11 terrorist attacks that nearly drove airlines out of business.

What makes Branson so successful is his never-say-die attitude. Too often, startups give up on good ideas too soon. The road to success is long and littered with failures and “no’s.” As Biz Stone, cofounder of Twitter famously said, “Timing, perseverance, and ten years of trying will eventually make you look like an overnight success.”

So stick it out for the long run. Market your uniqueness. Get investors on your side. Have a strong vision. And select the right leaders. That way, instead of succumbing to risk, you’ll thrive on risk.

Shellye Archambeau is CEO of MetricStream, a Palo Alto, CA-based company offering governance, risk, compliance, and quality management solutions to enterprises in the pharmaceutical, medical device, high tech manufacturing, energy, financial services, healthcare, manufacturing, food and beverage, and automotive industries. Follow @metricstream

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