Published on February 28th, 2017 | by Jose Vasquez0
How Much Risk Is There in Starting a Tech Company?
Starting a company always comes with a risk, but how much, exactly, is in store for a startup tech entrepreneur?
So you want to be an entrepreneur. Tech seems like the easy place to go. After all, technology is in high demand, it’s relatively approachable (as long as you have the right talent on your team), and depending on what you’re trying to create, it doesn’t require much in the way of initial capital. Still, there’s always a risk in starting a business, and you need to know exactly how much risk you’re signing up for, long before you pull the trigger.
Obviously, risk is a subjective measure, but there are some ways you can ballpark your potential risks.
There are some estimates floating out there that claim up to 90 percent of businesses fail in the first year. This isn’t necessarily correct. In reality, it’s about 50 percent of businesses that end up failing in the first 3 years. That’s still a large number, and few entrepreneurs want to leave their livelihood up to a coin toss, so keep this in mind before starting. Do you think you have more experience, talent, and drive than 50 percent of other tech entrepreneurs?
Your monetary risk will largely depend on how much skin in the game you have. If you plan on investing your life savings into the business, you’ll be taking a massive risk, but if you don’t need much capital, there isn’t much risk at all. You’ll also be taking a risk with your income. If you depend on the profitability of your business to yield your salary, you’ll likely experience some volatility in your personal life – even if you end up successful.
Finally, you’ll be risking the time you spend developing your idea in the first place. It takes hundreds of hours to create a business from scratch, and countless hours every week to keep it running. However, even if your business fails, you’ll still walk away with new experience and new connections.
There are some significant risks to starting a tech business, but it really depends on the nature of the business you’re starting. Just be sure you know what you’re getting into before you take the plunge.