Jared Diamond's new book, Collapse: How Societies Choose to Fail or Succeed, provides a simple framework of five forces that lead to collapse: environmental damage and population growth, climate change, hostile neighbors, weakened trade partners and failure to solve societal problems. I thought I would mash it up with the Techcrunch Deadpool:
The NY Times has a great piece on Dr. Diamond's theory and the academic debate amongst anthropologists. The above mashup is based on their infographic about the model and collapsed civilizations like the Maya, and it serves as an excuse to discuss the risks facing startups.
- Market risk is the big one. A little startup has very little control over market size and penetration. One way of managing this risk is to go after bigger markets, in which gaining a sliver is still substantial.
- People risk is all about the founding, management and larger team. Get this one right and not only can you execute, but have fun along the way. Get it wrong and it may be painful.
- Technology risk is both managing technical complexity and innovation as well as product management. Some say this risk can be managed with sufficient resources, but it is more about the timing and activity of resources against the pressure to go to market.
- Financial risk is the ability to fund the company to get to profitability. This is both a function of capital formation and the ability to execute on revenue. Many in the deadpool failed to do the former, but largely because of the latter.
- Disruption risk is a broader category for things like platform shifts, asymmetric competition, legal risk and other force majeure
I find that any substantial startup risk, and inherent reward, can fit into these five categories. Marc Andressen has a larger post exploring edge cases in the context of when VCs say no.
I'm actually with the anthropologists in this debate, where such simple frameworks help you think about where to pay attention, but larger forces are beyond an entrepreneur's control and vary significantly.