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Pandora Entrepreneurial Risks

Risk is inevitable in all business. Especially in smaller businesses where just starting and opening the door the first day is itself a large risk. You shouldn’t try to live life on the edge and risk all your assets, but taking calculated risks at times when it’s really easy to be conservative can make all the difference in your company.

Pandora

Take for example, Tim Westergren, founder of Pandora Radio.  In the winter of 2001, Pandora had no cash. They could either cut their losses and close up the company, or find a way to keep going.  They took a major risk by deferring salaries, which happened to also be illegal in California.  Ultimately over 50 people elected to defer almost $1.5 million over a period of 2 years.  This risky maneuver gave them enough runway to grow the company to a point that they were attractive for their next round of investment in 2004.

Pandora’s leaders and employees were in a mindset of “Win” rather than simple “Don’t Lose”. They had been losing all along—if they preferred that strategy, they certainly wouldn’t have chosen to continue to increase their exposure for loss by deferring salaries thus racking up additional liabilities. If they had been only slightly more conservative at that moment, they wouldn’t have become the widely recognized pioneer of Internet radio.

The “Win” Mindset

This “Win” mindset can come from looking at less-than-ideal situations as opportunities to grow and improve your business – if you are in a situation to make the calculated risks based on timely and accurate information.  Pandora had to know to what extent they had to cut costs in order to make it through their financial crisis successfully.

Entrepreneur Magazine (http://www.entrepreneur.com/) drives home the essential nature of risk-taking with a poignant statement: “The economy tanks. You have two options: hole up in a bunker and hope it ends before you run out of tinned peas, or innovate and emerge stronger…”

So look around, evaluate your industry and start looking for ways to solve other people’s needs and pains, take leaps of faith (with hard work) and capture those opportunities and you’ll be on your way to a “Win” mindset rather than a “Don’t Lose” one.

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