The following post is a guest post submitted by Brad Merrill who is a tech and business writer who focuses on the tech startup scene. Brad has since joined the LogicLounge Team”
Roughly 90% of startups crash and burn within the first year. For many people, that can mean losing your hopes and dreams, your life savings, and even your reputation as an entrepreneur. So why try?
Most people naturally have an aversion to risk, which means they have to be rewarded to take on risks. If the risk is high, the potential payout must be equally high to hold the person’s interest.
Every time we do something or don’t do something, there is a risk/reward algorithm being calculated in our brains. Do I go skydiving and enjoy the rush of falling at 125 mph, even though something might go terribly wrong and kill me? Should I order something new when I go out to eat, or stick with what I know? Do I quit gambling while I’m ahead, or risk my winnings to try to win more? We’re making these decisions all day, every day.
Entrepreneurs are a little insane, though, so their risk/reward formula is all screwed up. They’re less concerned with the payout of the reward, and more concerned with the adventure of the risk. A very small minority of entrepreneurs ever get rich, and many of them would’ve very well made more money had they chosen to work for someone else.
A true entrepreneur may have a very successful, high-paying job as a lawyer, but choose to leave his firm to start a business that may or may not succeed.
Quitting his job is his initial leap from the airplane. Anticipation is boiling inside of him. As he hires his first employee (who is also hopelessly insane), the entrepreneur feels the rush of the wind beneath him and begins his fall. When he lands his first round of venture capital, he reaches the point of freefall, where he experiences a sensation of weightlessness like no other. He sees the ground growing closer as customers pour in. At 2000 feet, he pulls the ripcord and his parachute doesn’t open. His money is spent, and his company goes bankrupt.
Of course, the entrepreneur could’ve floated safely down to a Google acquisition, but those chances are slim to none.
He may be injured, but he’ll be back up in that airplane in no time. Starting another business, going on another adventure. That’s the nature of entrepreneurs — they never regret a risk, and if they pass one up, they spend their whole lives wondering what they’re missing.