3 Reasons Why The Risk of Starting a Company is Lower Than You Think

By Nasos Papadopoulos, Head of Content at EF

Elon Musk says entrepreneurship is like eating glass and staring into the abyss.

Reid Hoffman says it’s like throwing yourself off a cliff and assembling a plane on the way down.

 Photo by  Lane Smith

Photo by Lane Smith

Now, a reasonable question any sane person would ask after hearing these analogies is “Why exactly would anyone want to do this?”

It’s definitely not the best marketing pitch I’ve heard recently.

But these analogies do imply a commonly held truth about starting a company:

It’s one of the riskiest things you could possibly do with your life.

Why?

Because building a startup is really hard and difficult tasks have a much higher risk of failure than easy ones.

So most startups fail.

It’s hard to argue against the view that building a company is extremely risky if viewed in isolation, from a micro perspective.

But if you change your frame, the risk changes too.

In fact as LinkedIn Co-Founder and EF investor Reid Hoffman put it himself when he came to visit us in London, the risk is much lower than you think.

If you’d like to stay alive, jumping off a cliff without a harness is riskier than doing it attached to one.

But it’s not that risky in an absolute sense if the cliff is 10 feet high and there’s a giant trampoline at the bottom of it.

So if we view building a company as one step in the context of a wider career, from a macro perspective, the risk starts to look a lot smaller.

Here are three reasons why the risk of starting a company is lower than you think:

1) Playing It Safe is Riskier in the Long Run…So Swing for The Fences

As humans we’re naturally risk averse and it’s easy to fall into a pattern of continuously choosing the safe option in all aspects of life.

But the truth is that more risk equals more reward both from a professional and personal perspective.

If you’re ambitious and want to scale your impact you should be seeking out hard challenges…not shying away from them.

Because these are the challenges that will both make the biggest difference in the world and help you grow and develop the most as a person.

That’s part of the reason why we don’t build lifestyle businesses at EF — we want to build world-class companies that can scale their impact across the planet and affect millions of people.

If you’re someone that’s capable of building a company, the risk of wasting your potential and not trying to build a game-changing one is too high.

If you always play it safe, knowing that you’re capable of more, the cost will catch up with you in the form of regret in the long run.

And people always regret what they didn’t do more than they regret what they did do — mistakes of action are always better than ones of inaction.

So swing for the fences…because the risk of wondering “what if” is bigger than the risk of striking out.

2) Building a Company Levels You Up…Even If It Doesn’t Work Out

 Photo by  Kyaw Tun

Photo by Kyaw Tun

The major career risk of starting a company is failure and the opportunity cost associated with it.

Starting a startup means that you won’t complete your PhD. You won’t be promoted at your tech company. And you won’t do anything else you could have done instead.

So if you fail, you’re left with absolutely nothing and you lose everything you could have had as well.

Now I see where those analogies about eating glass and falling off cliffs come from…

But if you look closer, the truth is that even if you don’t succeed, you’ll be better off career wise than you were before.

You’ll have a better knowledge of your strengths and weaknesses, an improved ability to perform under pressure and the superpower of being able to learn fast and adapt to change.

Building a company levels you up in almost every way — even if it doesn’t work out.

At EF we understand that this career risk can stop people building game changing companies. And we know that it might not work first time around.

That’s why we encourage cohort members that don’t form a company to re-apply to future cohorts. We help them join other portfolio companies who are looking for great people. And some cohort members even join our own team!

We do all this because we care about the people we serve and because we want to de-risk entrepreneurship and make it the most valuable and attractive career path for the world’s most ambitious people.

3) The Social Risk is Irrelevant…If You Find Your Tribe

32D Risk.jpeg

he major social risk of entrepreneurship is the perception of failure.

We care about what our friends, parents and peers think and naturally believe that failing will make them think less of us.

This social risk is real because it colours our experience and influences our behaviour.

Whether we like it or not, we are social animals and care about other people’s views of us.

And there’s a good reason for this too.

A few thousand years ago, failing publicly meant social exclusion which in turn meant separation from our group, which usually meant death.

Fortunately, those risks don’t exist anymore.

But we still respond to the potential of social exclusion or public failure as though they do.

This response has been around for a long time. It’s built into us as a survival mechanism. And it’s not going away any time soon.

So the best way to control it is to choose your environment and surround yourself with people who know that aiming high sometimes means falling short.

That will mean that even if your close friends and family don’t get it at first, there will be a whole bunch of people that do who are going through exactly the same thing as you.

So while the social risk will never be completely eliminated, it can be mitigated massively by finding your tribe.

That way you can eat glass and throw yourself off cliffs with someone else.

And what happens on the way down will take care of itself.

Entrepreneur First