De-risking is becoming a popular term in the business world, especially among investors and potential buyers. It refers to the process of reducing risks in a business, such as dependency on a single client for a large portion of revenue. By diversifying client base and revenue streams, companies can become less risky and more attractive to buyers or investors.
The concept of de-risking from day one is gaining traction among entrepreneurs, especially those looking to build high-value companies. The approach involves three steps: starting a small business that solves a problem for larger companies, working with government clients who are reliable payers, and leveraging government resources to build value. By following this path, entrepreneurs can reduce risks and increase the potential for growth.
Examples of successful de-risking strategies include Evren Ozkaya, who started a consulting firm serving the pharmaceutical industry following regulatory changes, and Jere Simpson, who ran a software development shop serving federal government agencies. By tapping into government contracts and resources, these entrepreneurs were able to build valuable businesses with reduced levels of risk.
The U.S. government plays a significant role in de-risking strategies, providing funding and support for small businesses through programs like Small Business Innovation Research. Entrepreneurs like Rob Hrabe, a former Air Force pilot, have leveraged government support to commercialize new technologies and secure contracts for their businesses. By working with government clients, entrepreneurs can access valuable resources and opportunities for growth.
Ronald Steptoe is another example of an entrepreneur who successfully de-risked his business, Warrior Centric Health, by leveraging non-dilutive grants and funding from the U.S. government. By focusing on solving specific healthcare needs for veterans, Warrior Centric Health is on its way to developing a data platform that can expand beyond its original target audience. This approach allows companies to grow and innovate without taking on unnecessary risks.
Overall, de-risking is an important strategy for entrepreneurs looking to build sustainable, high-value businesses. By focusing on solving problems for larger companies and industries, working with reliable government clients, and leveraging resources like grants and loans, entrepreneurs can reduce risks and increase their potential for success. The path to riches doesn’t always have to involve high levels of risk-taking – sometimes, a more strategic and calculated approach can lead to greater rewards.
