High risks, high return. We all once have ever heard this phrase. In business world if you aim for vast amount of profit, then you have to throw your investment in high-risk businesses, and usually, these businesses are startup companies. There are two major risks every business men should be aware of. Firstly, startup companies will take a time to have all their management issues done properly; thus, they might not be able to generate decent amount of profit or in worse cases, they lose. Although a CEO or even every single managers and employees have a lot of experiences in business world, their internal units still have to adjust themselves to each others in order to make their company grows well. For example, the company would not be able to produce products which fit customers’ content if people in production department and other departments couldn’t coordinate well and correctly. Secondly, financial health can be a huge risk too. Startup companies are always looking for many dependable financial sources (of course, you are one of them). A crucial case is that after you have invest in a company, it can’t find other financial source; therefore, they can’t get enough capital for their activities, which leads to delay in production line and many other severe problems. In summary, two common risks of investing in startup companies are bad staffs performance and financial health.
References
Managing Risk in my career and investing in start-ups
Brigitte Baumann’s Choices & Learning - Brigittte Baumann http://www.er.ethz.ch/seminars/EntreprLeader/Brigitte_Baumann_-_Managing_Risk_in_my_career_and_investing_in_startups.pdf Accessed on 14/02/2011
Thoughts on Venture Capital, risk, and investing in startups.
