The financial risk is high for investors


The Baker thinks he can make a success of this new activity but a risk must be taken and a lot of money invested.

The Baker is embarrassed about having made the Venture Capitalists lose money.

Risk is an intrinsic part of the business of financing enterprises. The Venture Capitalists calculate the degree of risk for each investment, knowing that if they don't take a risk, they won't make a lot. And it is normal to lose sometimes…

The Venture Capitalists agree to finance this new project which seems promising to them. The Baker feels less embarrassed and won't hesitate to ask for new investment on another initiative.

  1. Difficult to draw up a balance sheet for disruptive Transformations

    Whether it is an Enterprise start-up or disruptive Transformation in an existing Enterprise, the risk is considerable.

    In truth, the deeper the Transformation, the more difficult it is to predict the financial consequences: there is always one part risk in any Transformation, which explains why financial talents alone are not sufficient to make a decision; we need to have deep fundamental beliefs about the viability of a Transformation.
    Few innovative Enterprises were started by financiers: risk taking requires a Competence and a Business vision. A Transformation often succeeds because the initiator has an innovative vision of his/her Market and does not follow in the footsteps of his/her colleagues.
    Startup Business Plans are never respected: investors know this well and give priority to the trust placed in the management team over unpredictable financial forecasts. They nevertheless want a Business Plan that acts as a reference point and is updated progressively to reflect events.

  2. The right usage before profitability

    Aware of the difficulty of establishing a realistic balance sheet in disruptive Transformations, investors have modified their approach in 3 stages:

    • Stage 1: prove that the Product or Solution works. With a new product, for example, we have to find the right usage 
    • Stage 2: create volume and get a large share of the market
    • Stage 3: look for profitability

    Recent experiences with new technologies have shown that seeking profitability from the outset generally leads to failure.

  3. Do not be embarrassed to fail

    We cannot alway win: it is by investing in several startups that investors spread their risks.
    The Entrepreneur or project manager in the Enterprise should not be embarrassed about failing: the experience gained increases the likelihood of success of future Transformations.
    And, once again, do not hesitate to give up on a Transformation if it proves to be inefficient.

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The story of George the Baker is made available under the terms of the
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