#6. De-risking the startup transition

Entrepreneurship is about managing risk, not avoiding it.

Benjamin Graham

For many people in a corporate role, leaving to start a company may feel like a leap of faith. Back in January 2022, as I took a month off to plan my soon-to-be startup, this feeling of risk was very much present, and ultimately was the main reason I decided to remain in my company for another year. Fast forward to April 2023, however, and the sense of risk had entirely melted away, with the resulting transition into entrepreneurship feeling like a very stable, wise and low-risk decision. 

The shift in conviction mostly stemmed from a question that I asked myself in January 2022: What needs to be true so that leaving to start a company in 6 months’ time is a no-brainer? Otherwise said, what would it look like to really de-risk the startup transition?

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Risk vs. ambiguity

‘Risk’ is subjective and influenced heavily by one’s personal circumstances. For me, ‘risk’ was not about whether I should start a company. ‘Risk’ was about whether these were the optimal conditions under which I should leave to launch something of my own.

‘Risk’ should not be confused with ‘ambiguity’ which, for me, represents the set of unknowns you face when building a company. Your role as a founder is to uncover these unknowns, explore them, and then decide if/how to take action. Risks, however, represent a set of factors where the probabilities of different outcomes can be estimated and mitigation techniques put in place.

For me, a smart transition into entrepreneurship involved de-risking as much as possible, whilst accepting the inevitable ambiguity that is an inherent part of building a company.

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Creating Time:

Below I talk through a number of areas that I actively worked on to ‘de-risk’ the startup transition. Before jumping in, I want to underline one meta element that underpins the points below: Time. If I’m completely honest, the biggest shift from which all de-risking evolved was the creation of more time in my day-to-day, which, when working in a client-facing consulting role, was simply not present. For me, creating more time meant changing paths within my company and was accompanied by a frank conversation in which I was told that the career shift would slow my corporate progression – a trade-off I was willing to accept. 

(Note: One area I do not discuss below is financial stability. What it means to ‘de-risk’ this component depends heavily on one’s personal circumstances and perceptions of money, hence why I decided to omit this.)

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Five areas where risk was reduced

1. Finding great co-founders:

Perhaps the biggest shift for me between 2022 and 2023 was finding exceptional co-founders. Or, more precisely, finding individuals with complementary skillsets and a shared way of operating, who also wanted to start a company.

• ‘Complementary skillsets’ means big differences in core strengths. Two consultants with spikes in different areas did not cut it. 
• ‘Shared way of operating’ means: Do I really enjoy working with this person? Some big underpinning factors of which are: (a) Similar work-ethic (b) Shared long-term aspiration (c) Ability to have fully transparent and healthy communication (d) A common desire to learn and improve.

Whilst there is some luck in who you meet, there are many ways to increase your surface area for serendipity. For me, this was surrounding myself by a high concentration of data scientists and engineers by transitioning into the more ‘technical’ part of the company. I was lucky to have had the opportunity to work with my co-founders before starting the company, and would highly recommend engaging in a side-project with potential partners before making any commitments. One cool resource for teasing out compatibility and testing willingness to openly communicate is ’50 questions to explore with a potential co-founder‘.

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2. Cultivating a strong network:

One of the main observations in my first few months as a founder is that having a solid network of entrepreneurs, operators and investors is invaluable. From feedback on product/pitch deck, to access to investors and connections with potential customers – a strong network can drastically accelerate progress and prevent avoidable mistakes.

There are many ways to begin building this before starting a company, including: (a) Finding some cool founders you admire and offering to help them out for free on the side (b) Joining startup meet-ups/communities (c) Helping to run/build communities (d) Changing your living situation to become housemates with other founders etc. For me, my network sprang from creating a community to support current and aspiring entrepreneurs from McKinsey, X26. One underlying principle here is the offering of time and effort for free in order to create value for people who can support you greatly down the line. 

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3. Validating the problem space:

I believe that before you leave your job, you should: (1) Be able to articulate a clear problem statement with some solid validation you can point to; (2) Have a good reason to believe that you are well-placed to be the one(s) who solves this problem. 

It is absolutely possible to validate needs before taking the leap. This can come from conversations with likely users, scouring online forums to see what people are asking for, developing expertise from working in a certain domain, building and testing a very scrappy MVP (ideal) etc.. The most important factor here is genuine validation, which comes from high levels of self-awareness around your biases, acknowledging what you’re hearing and not what you think you’re hearing, and not becoming wedded to a particular story or solution. The most helpful book I read on this was The Mom Test.

Following the heart vs. head …

When I first started exploring problems in a structured way, I held the assumption that I needed to build in an area that I was inherently passionate about (for me, this was language-learning). I started to have many user conversations, but was struggling for validation and skeptical about the wider market dynamics.

Moving downstream: An important realisation came in a conversation with an exceptional founder in the Ed-Tech space who, despite spending 5+ years doing everything right, had come to believe that the area he was operating in within the Ed-Tech space was just not moving with the momentum needed for his company to ever become a unicorn. We discussed how a crappy company with strong tailwinds will likely have higher potential than an amazing company fighting market dynamics.

Given that I was very interested in building something in non-english language learning, which seemed to be counter to some important market trends, my stance began to shift: Perhaps the problem that makes the most sense for me to work on is not something I have always been passionate about.

I had also noticed over the years how my source of joy and drive stemmed more from the feeling of building, creating and solving a real problem, rather than the specific problem itself. In other words, the realisation that, for me, ‘passionate follows progress’ and not the other way around, allowed me to focus much more on leaning into a domain with attractive market timing and potential.

To summarise, a few key questions I found helpful for pressure-testing:

1. Have I found a problem with some genuine validation I can point to?
2. Do I have a unique insight to support solving this problem that others do not? 
3. Is this problem within a rapidly growing domain aligned with macro trends? 

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4. Cultivating founder mental models: 

Whilst there is no substitute for ‘doing’, I do believe that you can start building the mindset required for becoming a good founder ahead of the transition. There is a lot of helpful content out there for learning the do’s and don’ts, including: 

1. General startup content for new founders: YC start-up school
2. VCs & Fundraising: 20VC (Podcast) by Harry Stebbings; Fundraising (book) by Ryan Breslow
3. Customer interviews & product: Inspired by Marty Cagan (How to create tech products customers love), The Mom Test by Rob Fitzpatrick

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5. Honing the founder superpower: Self-awareness

I think of self-awareness as having a good knowledge of why we think the things we think, feel the things we feel, and do the things we do. I believe strongly that high self-awareness is a true superpower for a founder. It leads to intimate awareness of your assumptions, your blind-spots, the ability to regulate your emotional state, knowledge of your strengths and weaknesses, and a certain perspective on life that allows you to not over-identify with your company in ways that can otherwise become debilitating.

Through focused efforts, I have experienced what feels like immense growth in this aspect of life over the last few years. I did not invest time in these areas in order to set me up for success as a founder, but I do believe that the by-product has been a certain level of readiness to build a company that no other time-investment could have provided.

Many things have helped on this front, including:

1. Books: Awareness by Anthony De Mello, Positive Intelligence by Shirzad Chamine, The Power of Now by Eckhart Tolls
2. Meditation: The most profound impact of which came from a 10-day silent mediation that I did ~1 month before starting my company
3. People: Surrounding myself with people who are highly self-aware and with whom it is easy to engage in deep, reflective conversations
4. Therapy: Building a good understanding of the behaviours I display today that result from protective childhood mechanisms

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Getting into Y Combinator:

We recently got accepted into Y Combinator for summer 2023, 2 months after leaving our jobs. This in and of itself massively ‘de-risks’ what it means to now be a founder. That said, our getting into YC was the result of the de-risking laid out above.

Based on conversations, I believe the three main reasons our application was successful were: (1) A strong team with varying skillsets and a track record of working together (2) Building in an attractive, high-velocity market that we had clear experience in (3) Demonstration of clear commitment to the path ahead (i.e., “we have already left our comfortable jobs to do this full time”). I should add that, in the lead up to YC, almost 100% of our focus had been on user conversations and deepening our understanding of the problem (not on building).