Entrepreneurship is absolute risk. It is the financial equivalent of bungee jumping. Investing everything you have (time and money) in one single venture is like jumping off a bridge with no harness. One lesson I learned (after hitting the ground a few times) is that diversity is necessary to be a successful entrepreneur.
Diversity has always been a buzz word when talking about investing - put some money in real estate, some money in bonds, and some in the market. That part is easy. The difficulty comes when you attempt to diversify your time. How does a dedicated entrepreneur (and probably CEO) spend time on projects outside of his or her company? After all, isn't the founder and leader supposed to invest 110% of their time in their venture? The answer is no.
Some entrepreneurs feel diversifying your time is a sign of doubt or betrayal? The obvious question is asked - "Why are you spending time on that, when we have so much work to do?" Its a logical question, and by no means am I saying abandon your duties to your venture, but what I am encouraging is that you find ways to diversify your time to meet the best interests of you and your venture.
Diversity will vary depending on your situation and your ventures situation. If you venture is profitable, and well capitalized and everything is going right - then diversity could simply mean looking at spin-off opportunities, investments in other ventures or sitting on the board or active as an advisor to other ventures in exchange for stock. The time spent on these types of activities can be managed and controlled easily. If your venture is a startup, and profitability and stability are off in the distance - then you need to look at other opportunities that could yield income. If you have a million dollars in the bank from your last venture, then you probably have enough security to not worry about personal diversity. If you depend on cash flow to maintain your life style, then you need to have a plan on how to diversify income.
Here are some ideas on how you can invest time in your venture, but also diversify your income and risk as an entrepreneur:
1. Keep your Day Job - Many times first time entrepreneurs just jump ship from their day job to start their new venture. It takes a unique individual that jumps without a harness -and I think a lot of people who could be great entrepreneurs fail for this very reason. They simply can't survive without a paycheck. I realize being an entrepreneur and having a day job can interrupt your tee times and favorite TV shows - but its better you get used to making sacrifices early - because entrepreneurship is built off sacrifice. If you work at an innovative company, you may be able to allocate time during the work day to work on your new venture, otherwise you need to spend nights and weekends. Companies like Microsoft, Google and Dell were started in college dorms in between classes - so drop the excuses.
2. Be a Consultant - If you have expertise and knowledge that you can offer to companies as a consultant - then you may have the recipe for success. Consulting is the ultimate balance between entrepreneurship and a day job. As a consultant, you don't have strict hours, a boss or any restrictions related to starting your company. Consultants can also have more control over their hours and their work load. It may be worth finding a few customers willing to pay you a retained of 2-3k per month for 10 hours a week - to ensure you have income while you venture is starting up.
3. Lower your Bills - Depending on where you are in life -single, married, with or without children - this is your best option in preparation for becoming an entrepreneur. When I launched by second venture, I sold everything I had, left my house on the beach and moved into a one-bedroom apartment. I was single, so I didn't mind living like a bum - and I knew it was necessary if I wanted to dedicate my time to my new venture.
4. Leverage your (non-critical) Assets - If you happen to have equity in real estate (other than your home) or own any depreciating asset that can be sold, you may consider building up a 3-6 months of capital in the bank before making the jump. DO NOT risk your home or sell off a bunch of stock you own. This would be completely against my point of diversification. Look for assets that you don't need that could have value. For example. do you have an old jet ski or perhaps an old computer you don't need anymore? Sell it on eBay.
The key to diversifying your time is to understand you don't need to dedicate all your time to your new venture. Every startup has a certain pace - and it usually is slow in the beginning -and doesn't require as much time as you would think. In fact, a startup usually doesn't completely dominate your life until it starts to gain traction and succeed. In the first year, you will be waiting on certain factors in the critical path that are out of your control. For example, you will wait on vendors to finish the product. You will wait on the first customer to make their decision to buy.
After starting multiple ventures over the past ten years, I started to see that the pace of a new venture is not dependant on how hard you work or how much you work - but only in how smart you work. The key is to have patience and too let the venture gain momentum on its own. If its a good idea, good market and good people are involved - it will happen.