Gene pool engineering for entrepreneurs: Step #1: Identify the five largest risks (6/11)

In “Risk Analysis for Entrepreneurs and Venture Capitalists,” the Khosla Venture team outlines a process for systematically identifying risky components and their multiple failure modes. Risks fall into the category of technical risk, where the failure of interdependent modules could result in the collapse of the product as a whole, or general business risk or marketing risk, which encompasses everything else that is required to take the product to market. For gene pool engineering, each of the five mission-critical risks should be outlined by the team lead. In the case of ePowersoft, semiconductor device engineering (R1), materials development and deposition (R2), scaling manufacturing processes to multiple tools (R3), device packaging (R4), and plant operations (R5) represent the largest risk items. ePowersoft is an early stage company so most of the risks were technical and operational. The products fit into existing markets, so marketing to current requirements was not a key risk early on. One can imagine at a later stage, once the technology breakthrough has been established, adding “marketing to new markets” or “creating new markets” for this “power electronics component” as a key opportunity (or a risk if existing markets for this component were not accessible for some reason). One would then gene pool engineer to such additional risks or opportunities. Though gene pool engineering for risks is essential, it pays to also engineer the gene pool for additional “upside opportunities” the company may have. Keep in mind that Twitter, Facebook and Google were not “existing markets” but were markets created by the startup. Sun, Cisco, AOL were not existing markets either. Finding the team that can create the option of adjacent or new markets or innovative product approaches ( software as a service instead of a product) to old markets or adjacent markets (AirBnB, a market adjacent to hotels) to current markets is often the unexpected but massive payoff of engineering the right team.


Key Risks Facing Our Company



Five technical risks = success or failure

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