13 Ways To De-Risk Your Startup Failing

We’ve all heard the horror stories of startups failing, and the harrowing statistics, too--like how more than half of startups don’t last more than five years, and how 90% of all startups fail. Statistics associated with startup failure can be scary--but that’s no reason for you to give up on your startup dream just yet. Instead, it’s a reason for you to take a long hard look at the risks associated with starting your business, analyzing these risks, and addressing them.


The process of de-risking will protect you from many of the pitfalls and problems that can lead to failure. Your startup will have a better chance of survival if you lower the risks. Additionally, your business will have a bigger opportunity to become what you've always imagined.

1. Product risk.

It may seem counterintuitive, but most startups haven’t fully answered the question of what product they’re selling. It's easy to say, "I'm selling a product." However, it's more complicated to answer questions like: How does it work? Why would someone buy it? What makes it special? Find the answers to these questions--and reflect them in your sales pitch to potential investors and clients.

2. Market fit risk.

Having an ideal customer in mind is another important aspect to consider. If you don’t know who your ideal customer is, you may want to start out by finding the right niche market. Using surveys is an easy way to get to know your ideal customer because they’ll provide you with direct information on what they want--and therefore what they’d spend money and time on. Additionally, this will help shape the identity of your company and product, too!

3. Product quality risk.

Once you know what your product is and who your ideal customer is, the next step is building a reputation for a high-quality product or service. A beginner startup is risking a lot if all they have is an idea--which is why having a prototype or previous startup experience will help investors and clients alike have faith in you.

4. Partner risk.

Even if your startup idea is something you’ve been dreaming about for a long time, having the right partner is important. Once you’ve found someone who truly shares your vision, they’ll be able to help lead the way when it comes to developing your product, market fit, and recruiting the rest of your team. Check out this guide for how to find the right partner for your startup.

5. Team risk.

Assembling a great team is essential if you want investors to take you seriously. With the right team, you’ll have all the bases covered with colleagues when facing a variety of unexpected challenges--after all, you don’t want to be the only one working when the going gets tough!

6. Recruiting risk.

This risk follows team risk immediately because the two are very similar. What makes recruiting risk different, however, is that it’s long-term. A year down the line, will you be able to grow your team to the needs of your startup? Hiring a recruiter is an option that may help with this challenge.

7. Sales risk.

It’s always important to be able to demonstrate to investors that you’ll be able to sell your product effectively. You’ll want to add some people with sales experience to your team, and once you’ve identified your ideal customer, you’ll want to find ways of finding and retaining them. One easy way to get started is to maximize traffic growth for your website.

8. Market risk.

If you do manage to sell your product and get ideal customers on board, the next thing you’ll have to do, for your startup to survive in the long-term, is to ensure you’ll make enough money to become a huge company. Having a business plan and improving your brand through customer relationships is one way to minimize market risk.

9. Financial risk.

When you start off, you’ll be able to use crowdfunding tools, as well as investors (and even friends!), to help you out with your starting costs. It’s especially important, according to Entrepreneur.com, that you “make sure to identify key business milestones and schedules that clearly identify the points in time when...investments are necessary to reach the next major milestone.”

10. Short-term competition risk.

In addition to having an exciting product, interested customers, and investors, you’ll also need to minimize the risk of anyone wondering: what makes your product different from others like it? You’ll want to make your product different and get your customers to prefer your product. Here’s a list of 10 ways of finding out if your startup idea is brilliant enough which will help your business stand out from the crowd!

11. Long-term competition risk.

Once you are successful, you’ll have to worry about other startups copying your idea. A couple of ways to minimize long-term competition risk is by using patents and maintaining good brand perception.

12. Overspending risk.

It can also be easy, once you’ve reached a certain level of success, to spend, spend, spend! But just because you’ve earned the money doesn’t mean it’s time to spend it right away. This is definitely one of the reasons why so many startups with promise end up failing.

13. Legal risk. ​

It’s also a good idea to consult an attorney on a variety of areas--whether it’s laws that affect your company’s growth or copyrights or choosing the right business structure. What you certainly don’t want to do is hire an attorney when it’s too late!

Have you used any of these de-risk strategies? Which ones were most effective? Let us know!