Starting a business is not as risky as you think

When I tell people I'm an entrepreneur, they often say I'm brave to take such a huge risk. Many say they would like to start something too, but worry about the risks. Their reaction reflects what is supposed to be a fundamental truth about going it alone: ​​it's all about risk and reward, and if the reward is so high with startups (at least the ones that make the headlines), the risks must also be enormous. The thing is, I don't think the path I chose was risky at all, and I don't think entrepreneurship should be risky.

Financial risk

Potential founders have a vision of losing their home in a business venture gone wrong. People also worry about reputational risks: what will they think of me if I fail?

Financial risk can be mitigated by starting a certain type of business and seeking certain types of financing. My company, Getaway, has raised over $80 million in equity funding, which means I have a lot of investors around me who expect their $80 million to be repaid with a meaningful return. . It's a real pressure. But the most stressful business I started was a frozen yogurt shop I opened with a friend while in college.

We only got $50,000 in financing and it was in the form of a bank loan with a personal guarantee. This personal guarantee meant that if we didn't repay the loan, the bank would come after everything we had. Raising capital from venture capitalists or private equity firms has its downsides, but I've never heard of asking for collateral where you put your home and all your assets at stake. Only certain types of businesses at certain stadiums can obtain this type of capital and those who obtain it have found a way to finance their business with low personal financial risk.

The financial risk people worry about after financial ruin is their ability to earn a decent income. Often I find that people have the wrong idea of ​​what they can earn as an entrepreneur - that they will be strictly limited to eating ramen noodles. It is true that in the early days a company usually has almost no money. It's too early to have significant selling or traction with investors. But with a few scrappines and a promising idea, it's often possible to raise some seed capital and start making the most fundamental investments.

Invest in yourself

In my experience, if an investor believes in your idea enough to write a check, they want to see you fully focused on bringing it to fruition. They don't want you to pay yourself so little that you get distracted from work (by moonlighting or worrying). I will never argue that entrepreneurs do or should get paid what they could earn at a Fortune 500 company, but in quiet conversations with other entrepreneurs, most people I know who have raised outside capital get paid at market rate or thereabouts.

With financial risks at least partially reduced, people are worried about their reputations. The truth is that we live in a time and a place (for those of us in America and increasingly the rest of the West) that is probably the most accepting of failure. We rightly celebrate failure because it teaches us so much. While I don't think everyone should be an entrepreneur, it seems nowadays there's more judgment in being a corporate lackey than an entrepreneur, even one who fails (trust me because I 've more than once!).

Some businesses are really risky. Mortgaging the house to expand the farm is risky. Making art is risky. Starting your startup with a house full of kids or parents to take care of is risky. Spend your life doing something you hate because it's safer, to me it's risky. Starting a venture backed business where you get paid a salary and have a chance to participate in an exit is not that risky.