Diversification in startup – healthy or risky
Very few Startups have policies to diversify their business. It can be a pro or con depending the market condition.
Diversification forms an important part of the initiation process of any startup. During its nascent stages, it must seek to appeal to the multitude- hence diversification is necessary. It is also essential for a startup to emphasize on diversification because it goes on to increase its portfolio and the way it is perceived – as a multifarious problem solver.
It is said that market risks, or hitting a roadblock with a startup company can be evaded with diversification. While an alternative thought process also argues that this process of diversifying might get the startup to not be associated with anything in particular.
One thing every startup must bear in mind when implementing this, is that immensely calculated risks must be taken, this is the idea behind diversification – evading dire and unexpected losses.
Yet another school of thought, in this high risk – high returns atmosphere of startups- follows that if one significantly undermines the probability of acute losses, it carries with itself the omission of achieving immense gains too. This is an idea that some people believe to be the negation of what the spirit of startups is about.
When to diversify is another question that arises? Some companies choose to diversify during the primitive stages of startup development and branch according to the responses in each sector. While others choose to diversify only much later , when they are established companies and can bear to take some risks without rue.
Yet, it all boils down to each individual company and the individual spearheading it. Diversifying, whether done or not done, should be very integral to the functioning of each startup company.
- During initial stages of Startups funding, Diversification can bid more value.
- A few market risk or roadblock can be evaded with a strong diversification
- Implementing immensely calculated risks is the idea behind diversification.