Entrepreneurs must be prepared to take risks, sometimes spectacular risks.
Billionaire technology mogul, Elon Musk, famously accrued $165 million from the sale of his share of PayPal to eBay. He then invested virtually all of it into three speculative ventures: Solar City, SpaceX, and Tesla Motors. The latter two required much more capital than he had planned upon. In poker parlance, he was all in. He was within days of financial ruin — Near Zero — when NASA made a big financial commitment to SpaceX, allowing him to capitalize all three ventures and turn the corner to success. Today, he is a billionaire and all three ventures are successful.
In 1993, Anousheh Ansari convinced her husband Hamid and brother-in-law, Amir, to liquidate all of their collective savings and retirement assets to found their fledgling venture, Telecom Technologies Inc. (TTI). They were all in from the beginning. The partners went from Near Zero to great success with TTI.
Near Zero: Tragic or Magic?
Musk and the Ansaris both faced and conquered the greatest many people have – Near Zero or financial ruin – with poise and conviction and produced huge successes. Going to face our greatest fear in a dark place is daunting.
Now for a reality check: Near Zero is not a good place to be and no one would intend or plan to be in such a situation. I believe there are two possible outcomes from Near Zero: tragic or magic.
For every business failure, Near Zero occurs just before the business shuts down, for them it is tragic. They face hard choices. What to do next? Many will begin searching for a job and a paycheck. Some will reflect on lessons learned and then start up another business.
Sometimes, when an entrepreneur faces Near Zero, something magic occurs, as was the case for Elon Musk and Anousheh Ansari. It seems that when almost all options are exhausted and failure appears imminent, a sort of adrenaline of determination kicks in, an eerily clear vision appears that says, “here is what we must do now.” When the entrepreneur seizes the vision, acts with conviction, and takes immediate determined actions, suddenly something unexpected occurs: a resolution becomes evident. It is magic. Success suddenly becomes within reach.
What should you do to be prepared for Near Zero if it comes your way?
Make some decisions at the beginning of your venture. How much risk are you willing to tolerate? At what point do you decide that you must cut your losses? What key indicators for your business could point to a turnaround or success that may still be attained? In short, you should have a Near Zero plan.