Management Risk

Dec 04, 07 in Startups

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Over the weekend about 20 co-founders of Atlanta Startup Weekend, the creators of Skribit, got together to move the product to the point where we could extend the number of beta users in the wild. 

My biggest task during the day was to give a presentation over lunch about the state of the corporation and what I termed "Startup 101".  This included a discussion of the four generic categories of venture risk.   I thought it would be good for the team to think about these risks in relation to Skribit to understand what it might take to make the company successful.

One of the risk factors that we discussed was management risk.  When I told the group that I felt like the company's management risk was extremely high people were aghast.  The comment that stuck in my head was "we have more then 20 people here, we have more then enough to handle any situation that may come up."  True enough. 

But more people is not necessarily a good thing.  Management risk might be defined as the probability of the venture failing to meet its business objectives due to not having the people with the appropriate skills in leadership positions or due to poor teamwork.  Management risk is about both skill and teamwork.  You have to have both to reduce it.

As an example, when Fred Nixon, Vince Zappa, and I were working on the Alele concept, we were perceived as having relatively low management risk.   We had worked together at a successful startup for a number of years and our skill sets were rather complimentary, containing what is needed to get a startup off the ground.  The feedback we heard from investors was "We like the team."

Conversely (not to pick on all the good folks that helped bring Skribit to life, they have done great work), 49 co-founders who have never worked together as a team, regardless of the amassed skill set, has a high degree of management risk.  The teamwork aspect is a high hurdle.  Coordinating the effort of that many people is difficult.  The 20 we had over the weekend is much more efficient than 49 but still too many.  Don't get me wrong.  Having 20 people that want to stay actively involved in the project is fantastic, I have achieved the goal of bringing together a segment of the Atlanta startup community.  But as the concept moves forward a core team is going to form in some manner to remove the management risk.  The founders are smart, they will figure this out.

Before the holidays hit us I intend to do a brief writeup on the other categories of venture risk.