Risk and wine
Chris Yeh over
at Adventures in Capitalism highlights an interesting 7th try for a
dotcom hangover retailer:
Wine.com, the seemingly cursed etailer, is now on to its 7th incarnation. Due to dilution, rachets, and God knows what else, it now has 45,000,000,000 shares outstanding.
If you wanted to start a fresh wine retailer today, you could probably do it on a shoestring budget of less than a million.
Here is the
thing: they raised 12 million dollars this time around from Baker capital. 12
million! I understand the thinking – we need this much to have a chance at
success – but that type of thinking about risk is wrong. Why? Because we adjust our behavior based
on how risky something seems. We think
we increase chances of success by getting more money, time, resources etc for a
project, but with more money we spend more money to get the same thing done and
so our chances of success remain stubbornly the same. So how much is needed for
an idea? The minimum amount to get the idea going. Then plan for experimentation
and early failures – and when you find your model….expand!
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