How Facebook Turned a Big Risk into a Very Big Success
This is a story about risk. Everyone loves stories in which the hero takes a big risk, throws caution to the wind, and somehow finds a way to succeed. Will Smith and Tom Cruise are millionaires many times over because of our collective love of watching such fearless, daring escapades. The business world, of course, is no different. Everyone reads about the investor who puts a couple thousand dollars into some unknown company and is now rich beyond their wildest dreams, and who wouldn’t want to be that investor? But the frequency of those stories is incredibly rare. The business world is about taking smart risks and managing them carefully – it’s more Moneyball than Powerball. [ctt title="The business world is about taking smart risks & managing them carefully – it’s more Moneyball than Powerball." tweet="The #biz world is about taking smart risks & managing them – it’s more Moneyball than Powerball: http://ctt.ec/2f1nU+ @DaveMRader" coverup="2f1nU"] This story begins with Facebook buying Instagram, a thirteen-person company with no revenue, for $1B. The acquisition was widely panned in the press and made some potential investors nervous that Mark Zuckerburg was too young and naïve to run a giant about-to-be-public company. It ends less than four years later with Instagram valued at $35B and Facebook stock nearly tripling. To us on the outside, that was all we could clearly see. The important part, though, is the middle – the part we couldn’t see. Facebook knew Instagram would be a risk, and they knew they had to approach it smartly in order to make it worth the investment. I’m no Facebook insider or expert, but I want to talk about the process that all smart companies go through in order to manage such risks – the part we outsiders don’t see.
Have a plan to make it successful
Have a timeline and milestones to hit. Hold yourself accountable
Have an exit plan
Hedging is okay, but don’t hedge away all your upside.