Technology & Operational Risks

It's one thing to say you're going into the business of making and selling widgets. It's quite another thing to master the actual mechanics of making and selling widgets.

Technology and operational risks broadly cover everything having to do with execution: Can your team finalize the product design on a limited R & D budget? Will your product work as intended? Can you find reliable vendors? Can you manufacture it? Can you optimize the logistics of product distribution? Can you create an effective product support infrastructure? Will your firewall prevent hackers from stealing customer credit card numbers? Do you have a backup plan to keep your company running when an accident destroys some key equipment in your data center?

When it comes to execution, there's no substitute for experience. It's all about careful planning and watchful management by people who know what they're doing. Businesses started by rookie entrepreneurs blow up disproportionately because they don't know how to avoid even some more obvious land mines.

Entrepreneurs with a track record of success have a much higher probability of future success (30%) than first-time entrepreneurs (18%). (The paper studied entrepreneurs who raised venture capital, and defined "success" as having or registering for an IPO.) Learning from past mistakes is important, but if you really want to increase your chances of success, then find some co-founders who have succeeded in the past.