SAN FRANCISCO–(BUSINESS WIRE). Startup Risk Index 2022, Published today by commercial insurance company Embroker, explores the mindset of founders to understand the threats to their business and how to consider, plan and respond to them in a rapidly evolving marketplace and fundraising landscape.
The report cites a range of issues, from those within a startup to external factors that are often beyond their control. In 2021, 32% of startup founders said rising costs of doing business were affecting their operations. But in 2022, the majority of founders (26%) named increased debt as the number one internal risk to their company’s continued development. The top three external risks founders fear in 2022 are inflation (26%), supply chain bottlenecks and disruptions (24%) and competition (23%).
In response to these growing concerns, 30% of founders said controlling growth is one of their top risk mitigation strategies.
It’s clear that when founders think about business risks, they’re willing to take personal risks to drive their startup’s success, but only up to a point. In fact, 33% of founders said they would be willing to sacrifice their pride to improve their startup, while 33% said they would not be willing to risk their reputation for such endeavors.
Founders revealed their complex and sometimes conflicting relationship with risk, as 63% consider themselves ‘risk-averse’, while 65% later acknowledged that taking risk is essential to business and necessary to grow.
“VC-backed startups have enjoyed record fundraising and growth in 2021, but are now facing an increasing set of rapidly evolving challenges – including disruptions such as public market instability, supply chain shortages and inflation,” said Matt Miller, CEO of Embroker. “As we look to the remainder of 2022 and beyond, founders will be forced to navigate new and emerging risks and make some tough decisions.”
“While the challenges of today’s business environment may portend doom, there will be plenty of opportunities for growth,” Miller continued. “And if history tells us anything, founders are resilient. Founders are essentially builders. In tough economic conditions, things break and have to be rebuilt or built from scratch.”
Founders go through the risk scale: risk profiles
The report also examined how startup founders identify themselves when it comes to risk. The breakdown of the different profiles of founders ranged from the fearless to the most conservative mindsets:
- 17%: I am not afraid of risks and never will be. This is probably not my first startup.
- 38%: For me, risk means opportunity and I look for it regularly. This is how I grow my business.
- 27%: I take risks and prepare for them. Risks are inevitable and I know the consequences and anticipate any risks that may arise.
- 12%: Taking risks is a balancing act. I’m not afraid to take risks, but I have to react appropriately if a risk occurs.
- 4%: I don’t know yet as I’m a first time founder. I want my startup to grow, but I don’t know if I’m ready to take all those risks.
- 2%: I stay away from risks as much as possible.
Embroker has developed a Risk Archetype Quiz as a free tool to help founders understand their individual risk tolerance and what type of risk appetite they are.
“Now is the right time for founders to look inside themselves and acknowledge their risk mentality. By recognizing where they fall within that spectrum, they can learn how to balance both internal and external risks to strategically grow their business while protecting their bottom line even as new risks emerge,” concluded Miller.
To learn more about the risks startup founders are willing to take to grow their business, visit: www.embroker.com.
For the Startup Risk Index 2022 report, Embraker surveyed over 500 VC-backed startup founders in the US in February 2022. The survey was completed online and responses were random, voluntary and anonymous.
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