Normalcy Bias

The normalcy bias is defined by Wikipedia as the refusal to plan for, or react to, a disaster that has never happened before.

First-time startups suffer from the normalcy bias as they have limited experience with what can happen to startups over time.

Founders with previous experience tend to prepare better for the unexpected as they have encountered it before.

To overcome normalcy bias consider the following:

Plan for all potential contingencies such as

What to do if revenue goes in half.

What to do if revenue goes up 4X in one year.

What if your systems are hacked?

Know your financial numbers and how they interact, particularly what costs are fixed and variable.

Write out your contingency plans and add to them as you hear about challenges other companies face.

Explore what you don’t know.

Reach out to experienced founders to explore what you don’t know you don’t know.

There’s no way to prepare for every possibility but you can focus on those events that are probabilities.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.