Technology and entrepreneurship are lifelong passions of mine. Most things have not been invented yet, and imagining all the cool stuff we will enjoy in the future is a favorite past-time. But how do you turn new technology into valuable products, and how is that related to risk and reward?


Insight comes from reflecting on our experiences. To understand my views on technology, entrepreneurship, risk, and reward, a brief bio is probably in order. I knew already in high school that I wanted to be an entrepreneur (how that happened is another story 😅). My strategy for how to contribute to innovation started with pursuing a degree with a heavy focus on mathematics. The reason for picking mathematics was that I was so interested in programming and leadership that I figured I could learn those anyway. Mathematics, on the other hand, was something I needed help learning. While studying, I made sure to be very active in various student organizations and non-profits. That gave me an understanding of what it takes to inspire people to get things done, even without a salary (just like in a startup!).

Thanks to a great mentor I decided to learn a craft in my first job. In my case, I choose software engineering. Generic careers like strategy or management consulting disconnect you from the reality of execution. Talking is easy, doing is harder, and early-stage innovation management is largely defined by execution. Sure, you are likely to become a solid earner if you pick consulting, but you are unlikely to learn or do anything game-changing. All you learn is to optimize spreadsheets and ask questions. Not inspire people and provide answers. The only caveat maybe is that consultants make good investors, so there is that at least. 😉

After graduating, I was fortunate enough to get recruited by an early-stage technology startup that allowed me to combine my interest in mathematics, programming, and leadership, but that also introduced a product and commercial aspect to technology. Almost 15 years after deciding to start a business, it was finally time in 2018. Building a company means my experiences in mathematics, programming, leadership, and commercial strategy are finally converging. So what have I learned?

Setting a Strong Foundation

Successfully turning technology into a business is incredibly complex, and involves balancing a very large number of aspects. In my particular choice of entrepreneurship, i.e. enterprise deep tech, combining an intimate understanding of emerging technology with a deep understanding of user needs is the starting point. I think whatever your vertical, you have to be immersed in it to be able to succeed. You have to live and breathe the subject matter. Why? Because there are so many opinions, and so much information, that the only way to find a path is to have enough intuition and integrity to pick a path yourself. And picking a successful path means you will have to know what information to listen to, and what to ignore.

Personally, I believe in the following playbook:

Step 1. Look at the world and ask yourself “what is inevitable?”. I think for example that increasingly intelligent machines are inevitable. I also think a radical shift away from oil is inevitable. There are lots of large shifts going on in the world, and as long as you align yourself with one of them, you will be fine. If your company succeeds, you will have to ride this wave for many, many years so make sure you like the wave.

Step 2. Learn everything about the low-level details of your space and tech. The key to early-stage success is being extremely concrete. This is where most generalists fail. They have too casual an understanding of their domain. Learning everything takes time. In my case, maybe 10 years. I worked patiently with the nitty-gritty details, trying to solve problems, talking to smart people, and testing things. Rapid success is usually the result of very, very thorough preparations.

Step 3. Find something everyone is wrong about but that is necessary to get right. True value comes from scarcity. You will never make much difference if all you do is repeat what everyone already knows. Finding something that a large group of people is wrong about is key to building a valuable company. For example, Tesla is built on the conviction that a rapid shift to EVs did not have to take decades. Incumbents said, “we cannot move faster”. Elon Musk said, “hold my beer”. When we started Annotell, everyone said “Computers are going to replace humans”. I said, “No, but with great datasets, we can make computers a little less stupid”.

Step 4. Provide a super-concrete solution that helps users get it right. There is a huge difference between interesting and valuable. There is only one way to really figure out if something is valuable: getting others to pay for it. For some businesses, the first invoice takes a decade. For others, it takes two days. Sooner or later, revenue is the way we define value. How much your margins matter depends on volume and position in the market, but revenue is not optional. The only way to get top-line growth is to close the gap between a user’s need, your product, and their wallet.

Step 5. Inspire a world-class team to rally behind your idea. Without a great team, you are not going to make it. The massive shift you are part of, what you point out is wrong, the solution you offer, and your passion as a founder - all these factors have to inspire a large enough group of talented people to fight for your company.

Step 6. Ensure excellent execution. For all the big-picture questions you have to ask yourself up to this point, you also need to ensure that execution is world-class. This becomes much easier with a world-class team, but even then you need to ensure great management, clear expectations, well-defined processes, etc. Many entrepreneurs I know dismiss processes as a “big corp thing”. Those people are unlikely to build a large and successful business. Growth requires processes.

Step 7. Map out your growth journey. By now, you have the basics of a company. It probably took you many years to get here. You might even have a few customers. It is time to estimate “How large can this get?” and “What is the right path from here?”. Weirdly enough, some entrepreneurs start with these questions before steps 1-6. Few such entrepreneurs succeed in my experience. If all you care about is raising a huge round from a famous VC, then of course you need to make very deliberate choices up to this point. But that’s not the only way to succeed, and it is not the only sort of company you can build. This is where the risk-reward nexus comes into play. If you nail points 1-6 you will have a company, and it is likely to make money. As an entrepreneur, you now need to ask yourself “How much risk am I willing to take when balancing the future value of my company, and my probability of survival?”

Balancing Risk and Reward

The more audacious the proposed product, the larger the risk typically. Let’s say we think we have found a radical new way to generate energy, but that the capital expenditure required is multiple billions. Then we need to convince enough people that our solution is in fact likely to succeed and that investing in you and your team is the best way to make it real. The nice thing about expensive startups is that they are less likely to get a lot of competition. The bad thing is that they are expensive, and hence financially risky.

All investors know this, but I wonder if all entrepreneurs know this? My point is that entrepreneurs need to understand the balance between risk and reward when deciding to turn technology into products. Let’s look at a few scenarios:

Let’s say you have a great idea for a consumer mobile app, and it requires $5M to build a sufficiently good first version to launch it, what are the risks? Of course, the largest risk is that you fail to convert the $5M into a sufficiently good first version to attract users. Without strong usage metrics, you will likely fail to raise follow-up rounds. So investors will evaluate you personally, and your potential. Usually, with these cases, the risk is mostly on the execution side. Consumer markets are large, but the probability of successfully capturing a large part of consumers is low. Smart, hardworking teams with the right pedigree are more likely to figure out what works, so they get more funding.

If instead you have found a promising technology that might be able to change the way companies solve a big problem, but you need $50M to make it real enough for a proof-of-concept, then what are the risks? Now the risks include both execution, i.e. will you be able to turn the $50M into something good, and market size, i.e. is it worth putting $50M into solving this problem?

As a founder, you have to ask yourself: what risks am I comfortable with? Typically, the larger the upside, the larger the risk. A capital expensive start-up can weaponize money to dominate a market, assuming size translates into an obvious advantage. The more scalable your business model, i.e. the lower the service fraction and the higher the overlap between customers, the more money you need to defend yourself, but the larger you can get. Think search and social media. Low-touch products that require huge amounts of capital, but where success lands you a money printing monopoly.

On the other hand, if your business model involves more service and more expertise, you are less likely to get disrupted, but you limit your own growth. A smart, hardworking team can always make a specific customer happy. That’s what consulting is about. It’s lower risk but also a much lower reward. Building a large company is about figuring out where on the risk-reward curve you want to operate, and what you want to achieve - while still not compromising with the playbook above.

The World is not Fair

This risk-reward operating curve is also a big source of unfairness. Since so much of building a business is speculation, trust and patience play a big part in overcoming challenges. If you have the right pedigree and network, there is funding available that gives you time and freedom, or power, that others cannot afford. If you are not of the “right” background, and cannot get access to such networks, the magnitude of your idea might not overcome the hurdles in your way. Likely, this is changing as more money is available to startups and competition among venture firms increases. But it’s worth reminding everyone that getting access to the unfair advantages that come with premium funding can be significant. If you truly want to change the world, relationships and access are as important as hard work and smarts. Hopefully, if you work hard and build a strong track record, you will gradually be able to get access. If not for your first company so maybe your second, or your third. So be patient.

Living is also part of Life

I love working. I work more than almost everyone else around me. I’ve built a lifestyle that makes that possible. I’ve simplified all aspects of my life to the extreme. It means I don’t socialize as much or have major personal projects. I buy services for everything (cleaning, renovation, etc). I have a few hobbies (cooking, photography, chess, music) but all are compatible with my workload.

My wife and I have found a balance after many years living together where we enjoy life. Balancing risk and reward in entrepreneurship impacts your life in more ways than most people appreciate. So when navigating the risk-reward curve, make sure to also ask yourself: are my choices compatible with my “other” life choices? Many extremely “successful” ( read: rich and famous) entrepreneurs have rather disastrous personal life stories. Divorce, mental health issues, heart failure, frequent conflicts with loved ones. You name it. This is part of the equation, and those that dismiss this part likely get a brutal awakening sooner or later.


What is my point? My point is that you have to know yourself and know what you want, in order to make the right choices for yourself and your company. There are so many variations possible, and there is no universal truth to what is “best”. Is it more important for you to become a multi-billionaire than anything else? Well, then you need to accept a lower probability of success, much more work, and a more narrow set of possible choices. If you prefer a higher probability of success, then likely you are giving away some potential upside. It starts already when deciding to quit your job to start a company. The choice with the highest probability of success is to not quit. But deciding to quit is just the first choice. Balancing risk with reward is part of the journey for entrepreneurs every single day.

Personally, despite all these challenges, building a tech company is the most fun I’ve ever had!