I was party to an intriguing interaction and an interesting chat with a first-time founder recently. When faced with a risk and challenge, he took a defensive stance. I took a step back when presented with the tone and words he chose. He was effectively communicating that he was proceeding with grave caution and I felt like doing the same. It wasn’t a good thing.

I shared with him how I felt about his approach and invited him to consider other alternatives. He could have addressed the risk in a different way, by demonstrating that he had considered various options, made a decision about how to manage the risk, and directed our attention towards his vision. I’ve written previously about being prepared and focusing on impact.

The first-time founder made a comment about it being the CEO’s job to manage risk and that is a good point. Yes, startups are a bundle of risks. I have said that to entrepreneurs before — capital appreciation (increasing the value of your company) happens when risk is reduced. That reduction of risk is quantified in a rise in a valuation multiple (or shrinking of a cap rate).

However, there are different ways of managing risk and communicating as such – and that’s what I was getting at.

Using neighbourhoods as an example, here are three different ways of dealing with risk:

  1. Putting up fences and elaborate alarm systems to keep criminals out versus
  2. Creating an attractive neighbourhood where crime is deterred (maybe community police patrols) versus
  3. Creating an inclusive, integrated community where everyone feels like they’re an owner and they look after each other.

Option #1 is very defensive and exclusive. Option #2 is less blatant in its defensiveness, but still has a culture of exclusion. Option #3 is visionary and looks at risk in a completely different way, choosing a more positively impactful path in the long-run.

I encourage entrepreneurs – and investors – to think about managing risk from a place of abundance and to lead with vision rather than get defensive. This kind of approach to reducing risk stands a better chance of having a positive impact.

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For more impact investing tools, including mindsets for impactful risk-taking and risk management, check out Integrated Investing: Impact Investing with Head, Heart, Body, and Soul, available at all major online book retailers.

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