Last week with the cohort, I had several similar conversations with founders and teams about the importance of getting comfortable with taking risks. Risks to startups should be what coffee cups are to coffee shops — once you know how to use them well, you should be knocking them out rapidly, efficiently and almost automatically, if you want to be successful.
A tech company that’s not a startup doesn’t need to rely on taking risks and might even try to ban risk entirely. But in startups, our ability to take smart, measured risks is one of our few advantages. Most of the time, our competitors are more established businesses which outmatch us in terms of capital, people, channel relationships, brand and acquisition marketing budget, and existing customers (in short, almost everything else). But they are not comfortable with taking risks and they don’t know how to take smart risks because they avoid taking any risks at all.
As a startup team, if you’re unwilling or unable to learn how to take smart risks, you’re not a startup, you’re a small traditional business. (Which is fine, but don’t expect to achieve the outsized rewards that successful startups can sometimes get in return for taking risks).
I have a story about smart risk-taking from my own ancient history; a story with not one but two plot twists. I still share it with founders I mentor, more than thirty years later, not because it no longer has the power to embarrass me, but because even though it still embarrasses me, it provides a useful reminder for me to continue to take smart risks.
The pride before the fall
Here’s a photo of me in 1988, at the age of 23, with my close friend Craig, who definitely had better hair! I had a skinny red faux leather tie (which was a $20 knock-off).
In 1988, the internet wasn’t even a dream, and yet I was already a young man, still trying to find my true calling. After dropping out of a science degree, working in a variety of dead-end jobs and then beginning a communications degree, I was a year out from graduating with majors in journalism, media production and public relations. Because it was the Yuppie era of “greed is good” and because I was shallow, vapid and venal, I aspired to a career in PR because graduate salaries were higher than in journalism or media production. “Follow your dreams,” I was told. At the time, my dreams were of money.
In July of that year, the International PR Congress would be held in Melbourne, and it was the first time the industry’s biggest event would come to Australia. I decided I would find a way to get my broke-self to Melbourne from Sydney, and then, at the conference, I would find a way to pitch myself to the most important and influential men (because in 1988 they were all men) running Australia’s biggest PR agencies.
What could go wrong with taking a risk like that?
Somehow I sweet-talked someone from the conference organising committee into posting me a contact list of everybody attending the conference (perhaps, because it was 1988, privacy wasn’t such a big deal, and perhaps because I also bent the truth a little about wanting to interview some of these industry leaders for some sort of university assignment).
Let’s just say a copy of the contact list fell into my hands and I decided to send a copy of my resume, a short ring-bound portfolio of work, and a jaunty, daring, challenging cover letter straight to the bosses of Australia’s two biggest PR agencies, Hill and Knowlton and Royce Consolidated.
What could possibly go wrong with taking a risk like that?
THE FIRST TWIST: The fall
Sadly the cover letter hasn’t survived but I think you can read between the lines of the letter I received in reply.
In my haste to dispatch my mailouts to the two head honchos, I had accidentally swapped the cover letters for each, effectively and irrevocably sending a letter to each of them, but addressed to the biggest rival of each of them. Instead of a jaunty, daring, challenging pitch by a consummate young professional, I had made it abundantly clear that I still had a lot to learn about professionalism.
Oh, the shame!
Needless to say, I wanted to curl up in a tiny ball and hide in abject shame. For a few days I was certain I’d never get a job in the PR industry, that with each passing day, more journalists and PR people would be sharing the story of my slip-up at the many watering holes our industry was essentially reliant upon because we didn’t yet have an internet. Yes, public shame predates the internet!
To make matters worse, I still had to attend the conference in Melbourne. I had persuaded my Dad to lend me his van, and I had hustled Craig and three other friends to share the cost of (in 1988) a 15 hour drive each way. We were all booked in to stay at the cheapest place in Melbourne we could find — the YWCA. We had all shelled out $350 per head for an all-access pass to the conference. There was no way I wasn’t going to this conference, no matter how big a fool I thought I was and no matter how much I feared that everybody would know.
Why my risk was smart
Although I’d embarrassed myself in the eyes of two powerful industry leaders (and possibly their teams) there were still many more fish in the sea. If I’d written to all of the managers of all of the PR agencies attending the conference, that wouldn’t have been a smart risk — there would have been no way to mitigate the damage to my reputation. By aiming high, I’d only damaged my reputation with 5% of my total addressable market. It turns out, the profession had many more things to talk about at the bar each night, than my mistakes. If you know someone who works in PR, you’ll know that both clients and journalists are an inexhaustibly rich vein of foolishness.
A few days into the conference, Craig and our other friend Jeff persuaded me to work through my shame and start networking with potential employers. I was still embarrassed and that really helped, because I shut up (I didn’t want to put my foot in my mouth) so instead, I listened. Turns out, important people really like to be listened to.
I collected a lot of business cards, paid close attention to how people responded to me when I did talk about myself, and I learned a lot more about what employers might actually want, rather than what I thought I had to offer.
I practised much better customer research at the conference than I would have done, if my risk-taking letters had gone to the right people.
The second twist
When we got home from our 15-hour drive back from Melbourne, there was a letter waiting from me, and the return address was from the other major PR agency I had accidentally sent the wrong cover letter and portfolio to. As I reluctantly approached the letter resting on the kitchen bench, all those feelings of shame and bruised young male ego rose up into my throat: was I going to be embarrassed all over again?
I didn’t want to open the letter, but I didn’t really have a choice — if I threw it away unopened it would haunt me forever, and if I postponed opening the letter, it was going to haunt me until I opened it. I decided to get it over with quickly. Carefully, with my eyes half-closed to protect my ego, I opened the envelope and took out the crisply folded letter from Mr Graham Canning, the General Manager of the Sydney branch of the huge international PR firm, Hill and Knowlton.
The letter itself sadly did not survive the many years that have passed since then. But I remember every word, because it turned my fortunes around and I learned so much from the experience.
To paraphrase, Mr Canning wrote that it seemed like I still had a lot to learn about being a public relations professional, but if I was prepared to work the remainder of the year as a part-time, unpaid intern alongside his team, maybe there’d be an entry-level full-time job for me the following year.
Through that internship, I made the connections that started my career. In the entry-level job he offered me the following year, alongside my media relations responsibilities, I volunteered to lead the project to decide what sort of personal computer network the agency should install, because I loved computers and the rest of the agency hated them but realised the days of a typing pool were passing (yes, they had a room full of women typists!). That led to freelancing for Australian Macworld magazine, writing about everything I was learning about being the sysadmin of a Mac-based office LAN (which was still a very new thing in 1989). Becoming the Editor of Australian Macworld magazine took me to San Francisco, where I got my first real taste of Silicon Valley and tech startups, and fell in love with the industry I would one day decide to work in, rather than write about.
Sometimes the mistakes you make when you take risks are what lead to the biggest rewards!
Smart risks have the following attributes:
- You can express them clearly in a hypothesis and design an experiment to test them;
- Your experiment will clearly validate or invalidate your hypothesis, with no ‘maybe’ results;
- They are quick and cheap to perform (like filling a coffee cup);
- If a risk goes wrong, the damage is containable;
- The potential upside of the risk going right is either easily and quickly scalable, or has outsized returns if you can only perform it once.
Remember, you don’t need to build a startup, you can just be a small business. But you’re not building a startup if you’re not taking smart risks frequently.