[MUSIC] You cannot separate risk from entrepreneurship, nor would you want to. Risk is the very essence of entrepreneurship. Risk is the thing that gives you an opportunity for your company to scale, so don't be afraid of risk, however you need to learn to manage it. One of the questions that investors have asked me both when I started companies are also when I'm helping to mentor them is, do you know what your risks are and what are you doing to mitigate against them? Starting a business is about finding out where your strongest. In other words, you run a series of experiments and based on that, you know what customers like about your business. What you then do is proceed to double down on these things or even triple down in them and that's the scale up face. However, one of the if you think use the sporting analogy while you're asking yourself in a start up phase is how do we score goals. Scaling by contrast, is about what's your weakest about your business. So what you need to do is find out where your week so you can eliminate these things to use again, the same sporting analogy, you're asking yourself how you defend and remember that its defense that wins championships. There is an article in the readings which you can go look at, which talks about the various risks that your company might face. You can go, you should read this article and I'm going to walk you through some of the elements that are in this article. Let me talk to you first about the product market fit risk. The example I like to give is of hot hotels, my own company during the summer of 2000 and 15, based on an incident that happened, we ended up having selling a lot more hotel rooms than we expected in 2015. As people switch their booking from North Africa in order to Spain, we ended up making a lot of money, but that wasn't to anything we did it was true variety of circumstances. In other words, for us to say we had a specific product, market fit was more to do with a piece of look rather than something we had actually done. The next thing is product quality. This is the this is what you do. Sometimes when you add a subsidy, Uber for famously adding a subsidy to to their product and because of that subsidy, they're selling an awful lot of taxi rides. However, that's a risk. What happens if they take away the subsidy, maybe their product doesn't have the same quality that they think it does. Number third risk is the idea of team risk and in particular the idea of pressure. What happens in the start up phase, maybe you're working together and the pressure doesn't come on as much sometimes when you're starting to deal with overseas territories, suddenly you're getting calls in the morning from Singapore in the evening from Los Angeles. That brings lots more pressure on your team. And there's a pressure that a team which functions very well in a startup environment does not function as well in a scale of environment. Number four is recruiting risk. The idea of the high performer, I mentioned in the previous video that one of the exciting parts about the scale of processes that you can add a high performer. However, this brings a risk. High performers like to work with other performers. So there's a danger you could bring in someone who is brilliant to what they do themselves, but don't fit in with the rest of the company. That's something you have to watch for. Number five is the sales risk. And this is the idea of scenarios, what you need to think about in the sales risk is that you run a number of scenarios, maybe when you're trying to pick between the signal and the noise that you, what you want to interpret as being a signal is actually a noise. Sales risk is also the other factor of when a sales guy comes in and starts to identify a product that they start to kind of like aspects of it, even though the customer has a different thing. As well, comment when we talk about sales, listening is a key part of sales, it isn't just talking. Number six is the market risk or the the macro economy risk. What we're talking about here is sometimes you develop companies are known for develop, being very successful based on macroeconomic factors. In other words, the general success of the economy is something that they benefit by. Number seven is the funding risk and particularly the issue of investor commitment. What you need to know about investors is that investors have investors. In other words, an investor will tell you they are committed to doing their next round and maybe you'll get complacent. Maybe you won't look at scenarios, but then something that has nothing to do with you. Their money might be pulled. So that's one of the things you need to worry about with the funding risk. Don't guarantee or don't behave as if a funding round is guaranteed until it's actually in the bag. Number eight is the short term competition risk. Within industry, what you have is a piece of short term competition which will drive you to compete against a particular company that's similar to you. And you will think that beating that competition is beating that competitor is the key to your industry. Sometimes you need to move completely away from that. Sometimes the actual battle is in another situation, so be very careful of having short term competition only within your industry. The other nine is the long term competition risk. This is the idea of new entrance. This is the idea of being Amazon or Google or Uber or anything like this. In other words, what you have done is that you leave yourself vulnerable to, entry by bigger, bigger people who are better resource, there's no guarantee that will necessarily win. However, it is something that as a risk you have to mitigate is you have to think about what is our most if somebody really attacks us. Try not to talk too much about Steve Jobs because he's perhaps overused as an example. But one of the questions that I really liked was something Bob Cringely asked him in a documentary he made called the last interview, he turned to him and said Bill, how did you learn about business? Which was actually a very good question. The answer Steve gave was an even better answer when he said that one of the things he found is that people with the business background don't think very deeply about business. And conversely, people without a business background are forced to think about it once the conclusion he came is that if you think about it, you can actually work it out yourself. In other words, business is not really that complicated, but you have to make the effort. One of the things I would recommend to people if they have a background in business is still to think very deeply about the issue. Ask yourself why things are the way they are because if you don't do that, you are vulnerable to people who actually think about things from first principles. [MUSIC]
