venture/risks-and-constraints.md

# Risks & Constraints

## AWS Non-Compete Constraint

### Current Situation
**Non-compete with AWS exists** - specific timeline and details need clarification.

### Strategic Implications

**What This Rules Out:**
- ❌ Building services that directly compete with AWS IoT Core, SiteWise, Greengrass
- ❌ Marketing as "AWS alternative" or "AWS replacement"
- ❌ Offering managed services that replace AWS products
- ❌ Using AWS infrastructure for customer workloads

**What This ALLOWS:**
- ✅ Consulting and integration services (helping customers USE AWS better)
- ✅ Working with companies who DON'T use AWS (non-customers)
- ✅ Edge-first architecture (complementary, not competitive)
- ✅ Building on Azure, GCP, or on-premise infrastructure
- ✅ Targeting niches AWS doesn't address well (data sovereignty, SMB market)

### Compliance Strategy

**Positioning:**
- "Edge-first industrial IoT partner" (NOT "cloud platform")
- "OT/IT integration specialist" (NOT "AWS competitor")
- "Data sovereignty and on-premise solutions" (DIFFERENT from cloud-first)

**Customer Targeting:**
- Focus on companies with data sovereignty concerns
- Target AWS non-users (plenty in manufacturing)
- Position as "on-ramp to cloud" not "cloud replacement"
- Offer to integrate WITH AWS if customer wants (complementary)

**Messaging to Avoid:**
- "Cheaper than AWS"
- "AWS alternative"
- "Replace your AWS IoT infrastructure"
- Any direct competitive language

**Safe Messaging:**
- "Edge-first architecture for data sovereignty"
- "Works on-premise, integrates with cloud if desired"
- "We bridge OT to IT, including AWS when appropriate"

### Timeline Considerations

**Questions to Clarify:**
1. What is the exact non-compete expiration date?
2. Does consulting/integration violate the non-compete?
3. Are edge-first/on-premise solutions acceptable?
4. Can we help customers connect to AWS (integration)?

**Strategic Options Based on Timeline:**

**If expires in <12 months:**
- Focus heavily on consulting (safe)
- Build network and customer base
- Plan platform launch post-expiration
- Use consulting to fund infrastructure

**If expires in 12-24 months:**
- Start with consulting (safe)
- Build edge-first platform (likely safe if positioned correctly)
- Avoid any AWS competitive language
- Launch premium features post-expiration

**If expires in 24+ months:**
- Edge-first platform is likely fine (different market)
- Focus on data sovereignty/on-premise customers
- Explicitly avoid AWS competitive positioning
- Build moat before non-compete expires

---

## Market Risks

### Risk 1: Customer Acquisition Difficulty

**Risk**: Can't find customers willing to pay.

**Probability**: Low-Medium  
**Impact**: High (no revenue)

**Mitigation:**
- Start with personal network (13 years of contacts)
- Pilot pricing ($10k) reduces barrier to entry
- Multiple outreach channels (LinkedIn, ISA, referrals)
- Consulting model allows flexible pricing
- Can work part-time while employed (no income pressure)

**Contingency:**
- Extend pilot period (90 → 120 days)
- Lower pilot pricing ($5k-8k)
- Expand geographic reach (remote work)
- Partner with system integrators (referrals)

---

### Risk 2: Project Scope Creep

**Risk**: Projects take 2-3x longer than estimated, burning time and profit.

**Probability**: Medium  
**Impact**: Medium (reduced hourly rate, delayed other projects)

**Mitigation:**
- Fixed scope in contract (specific deliverables)
- "Out of scope" clause for additional work
- Charge extra for scope changes
- Start small (40-80 hour projects)
- Time tracking to identify issues early

**Contingency:**
- Renegotiate scope mid-project
- Charge T&M for additional work
- Learn from experience, improve scoping

---

### Risk 3: Platform Technical Failures

**Risk**: Multi-tenant platform has stability issues, data loss, or downtime.

**Probability**: Medium (new platform)  
**Impact**: High (customer churn, reputation damage)

**Mitigation:**
- Start with 2-3 pilot customers (test thoroughly)
- Automated backups (daily + offsite)
- Monitoring and alerting (proactive)
- Gradual rollout (don't scale too fast)
- 99.5% uptime SLA (reasonable, achievable)

**Contingency:**
- 24-hour support commitment
- Free month of service for outages >4 hours
- Backup to customer premises (if needed)
- Migrate to more stable infrastructure if needed

---

### Risk 4: Competition from Established Players

**Risk**: Siemens, Rockwell, or others target SMB market with aggressive pricing.

**Probability**: Low-Medium  
**Impact**: Medium (harder to compete)

**Mitigation:**
- Focus on speed (weeks vs months)
- Stay nimble (can pivot faster)
- Personal service (vs enterprise bureaucracy)
- Edge-first positioning (different than cloud)
- Build relationships (sticky customers)

**Contingency:**
- Differentiate further (AI features sooner)
- Partner with them (reseller/referral)
- Go deeper in vertical (specialize)
- Geographic focus (local presence wins)

---

### Risk 5: Customer Churn

**Risk**: Customers leave after 6-12 months.

**Probability**: Medium  
**Impact**: Medium (recurring revenue loss)

**Mitigation:**
- Deliver value (measurable ROI)
- Excellent support (fast response)
- Continuous improvement (new features)
- Annual contracts (reduce churn)
- Regular check-ins (relationship building)

**Contingency:**
- Exit interviews (learn why)
- Win-back campaigns
- Improve product/service
- Target higher LTV customers

---

## Operational Risks

### Risk 6: Solo Founder Burnout

**Risk**: Working full-time + building venture leads to burnout.

**Probability**: Medium-High  
**Impact**: High (health, business failure)

**Mitigation:**
- Set boundaries (nights/weekends only, initially)
- Phase 1 is part-time friendly (consulting)
- Automate early (reduce manual work)
- Hire contractor at $15k/month MRR
- Plan exit from full-time job at $30k MRR

**Contingency:**
- Take breaks (1 week off per quarter)
- Reduce scope (focus on high-value activities)
- Hire sooner (even at lower MRR)
- Consider part-time job (vs full-time)

---

### Risk 7: Technical Debt Accumulation

**Risk**: Moving fast creates messy code/infrastructure that's hard to maintain.

**Probability**: High (expected in bootstrap)  
**Impact**: Medium (slower future development)

**Mitigation:**
- Document as you go (runbooks, architecture)
- Refactor periodically (quarterly)
- Use proven technologies (not bleeding edge)
- Leverage existing expertise (LXC from ZLH)
- Plan for refactoring in roadmap

**Contingency:**
- Allocate 20% time for tech debt
- Hire contractor to clean up (when cashflow allows)
- Pause new features to refactor

---

### Risk 8: Regulatory/Compliance Issues

**Risk**: GDPR, HIPAA, or industry-specific compliance requirements.

**Probability**: Low-Medium  
**Impact**: High (fines, lawsuits)

**Mitigation:**
- Avoid regulated industries initially (healthcare, finance)
- Data sovereignty approach helps with GDPR
- Consult lawyer before regulated customers
- Insurance (E&O, cyber liability)
- Contracts with limitation of liability

**Contingency:**
- Hire compliance consultant
- Obtain necessary certifications (ISO 27001)
- Partner with compliant platform (pass-through)

---

## Financial Risks

### Risk 9: Insufficient Capital

**Risk**: Run out of money before reaching profitability.

**Probability**: Low (bootstrap model)  
**Impact**: High (business failure)

**Mitigation:**
- Start with only $500
- Consulting generates cash quickly
- Customer-funded platform development
- Work part-time while employed
- 3-month cash runway target

**Contingency:**
- Take on more consulting projects
- Slow platform development
- Personal loan ($5k-10k if needed)
- Stay at full-time job longer

---

### Risk 10: Pricing Too Low

**Risk**: Price too low to be profitable or attract wrong customers.

**Probability**: Medium  
**Impact**: Medium (low margins, wrong market)

**Mitigation:**
- Research competitive pricing
- Start higher, discount selectively
- Value-based pricing (not cost-plus)
- Regular price reviews (quarterly)
- Test pricing with pilots

**Contingency:**
- Raise prices for new customers
- Grandfather existing customers (temporarily)
- Add premium features (justify higher prices)

---

### Risk 11: Payment Collection Issues

**Risk**: Customers don't pay on time or at all.

**Probability**: Low-Medium  
**Impact**: Medium (cash flow issues)

**Mitigation:**
- 50% deposit on all projects
- Credit card on file for recurring
- Net 15 payment terms (not net 30)
- Automated payment reminders
- Pause service for non-payment (after grace period)

**Contingency:**
- Collections agency (last resort)
- Legal action (if >$10k)
- Write off as bad debt (<$5k)
- Tighten credit requirements

---

## People Risks

### Risk 12: Can't Find Good Contractors

**Risk**: Hire contractor who doesn't work out.

**Probability**: Medium  
**Impact**: Medium (wasted money, customer issues)

**Mitigation:**
- Start with part-time contractor (10-20 hours/week)
- Trial period (30-60 days)
- Clear expectations and metrics
- Start with simple tasks (customer support)
- Use Upwork/Fiverr initially (lower commitment)

**Contingency:**
- Fire quickly (if not working)
- Try multiple contractors (find good fit)
- Do work yourself temporarily
- Adjust expectations (good > perfect)

---

### Risk 13: Key Person Dependency

**Risk**: Business depends entirely on founder's knowledge/relationships.

**Probability**: High (solo founder)  
**Impact**: High (business can't run without you)

**Mitigation:**
- Document everything (runbooks, processes)
- Train contractors early
- Standard operating procedures
- Automated systems (reduce manual work)
- Build team (hire full-time employees)

**Contingency:**
- If health/emergency: Pause new sales, maintain existing
- Contractor can handle day-to-day
- Sell business (if necessary)

---

## Strategic Risks

### Risk 14: Wrong Market Segment

**Risk**: Targeting SMB manufacturers isn't viable; need enterprise.

**Probability**: Low  
**Impact**: High (pivot required)

**Mitigation:**
- Validate with Phase 1 consulting
- Multiple customer conversations (discovery)
- Test pricing with pilots
- Be willing to pivot

**Contingency:**
- Pivot to enterprise (need capital)
- Pivot to different vertical (food/bev to automotive)
- Pivot to pure consulting (no platform)
- Partner with enterprise vendor (reseller)

---

### Risk 15: Technology Becomes Obsolete

**Risk**: LXC, MQTT, InfluxDB become outdated; need to rebuild.

**Probability**: Low (these are mature)  
**Impact**: Medium (need to refactor)

**Mitigation:**
- Use proven, mature technologies
- Standard protocols (MQTT, OPC UA)
- Containerized (easy to migrate)
- Monitor technology trends
- Plan for evolution (not revolution)

**Contingency:**
- Gradual migration (not big bang)
- Containers make it easier
- Customer data is portable

---

## Mitigation Summary

### High-Priority Mitigations (Do First)

1. **Clarify AWS non-compete** (impacts entire strategy)
2. **Start with consulting** (fast cash, low risk)
3. **Document processes** (reduce key person risk)
4. **50% deposits** (payment risk)
5. **Start small** (pilot customers, test thoroughly)

### Medium-Priority Mitigations (Do After Launch)

6. Automated backups and monitoring
7. Contractor hiring process
8. Regular price reviews
9. Customer success program
10. Technical debt allocation

### Low-Priority Mitigations (Do When Scaling)

11. Compliance certifications
12. Insurance (E&O, cyber)
13. Multi-server redundancy
14. Advanced automation

---

## Risk Acceptance

### Risks We Accept

**Solo founder limitations**: Building slowly, hiring when cashflow allows  
**Technical debt**: Will refactor periodically, not trying to be perfect  
**Market uncertainty**: Willing to pivot if needed  
**Competition**: Can't compete on everything; focus on differentiation  

**Why**: These risks are inherent to bootstrapping and acceptable given the low capital requirements and fast validation approach.

---

## Decision Points

### Go/No-Go Criteria

**End of Phase 1 (Month 3):**
- [ ] Generated $20k+ revenue (consulting)
- [ ] 2+ completed projects
- [ ] 5+ warm prospects for Phase 2
- **Decision**: Proceed to Phase 2 or continue consulting only

**End of Phase 2 (Month 9):**
- [ ] $10k+ MRR achieved
- [ ] 5+ monitoring customers
- [ ] <10% churn rate
- [ ] Platform stable (99%+ uptime)
- **Decision**: Proceed to Phase 3 or stay at Phase 2

**End of Phase 3 (Month 18):**
- [ ] $30k+ MRR achieved
- [ ] 3+ premium customers
- [ ] Contractor hired and productive
- **Decision**: Continue scaling or consider exit options

---

## Insurance & Legal Protection

### Recommended Insurance (When Revenue Hits $100k)

**Errors & Omissions (E&O):**
- Coverage: $1M-2M
- Protects: Professional mistakes, bad advice
- Cost: $1k-3k/year

**Cyber Liability:**
- Coverage: $1M
- Protects: Data breaches, cyber attacks
- Cost: $1k-2k/year

**General Liability:**
- Coverage: $1M
- Protects: General business operations
- Cost: $500-1k/year

**Total**: $2.5k-6k/year (affordable at scale)

### Contract Protection

**Always Include:**
- Scope of work (specific deliverables)
- Payment terms (50% deposit, net 15)
- Limitation of liability (cap at project value)
- Warranty disclaimer (no guarantees)
- Indemnification (customer indemnifies us)
- Termination clause (either party can exit)

**Lawyer Review**: Have lawyer review standard contract ($500-1k one-time)

---

## Contingency Plans

### Worst Case Scenarios

**Scenario 1: Can't find any customers**
- **Response**: Extend timeline, lower prices, expand geography, pivot to pure consulting

**Scenario 2: Platform fails catastrophically**
- **Response**: Restore from backups, migrate to new server, refund customers, rebuild trust

**Scenario 3: AWS non-compete violation alleged**
- **Response**: Consult lawyer immediately, potentially pivot positioning or pause business

**Scenario 4: Major competitor enters SMB market**
- **Response**: Differentiate faster (AI features), go deeper in vertical, partner with them

**Scenario 5: Personal emergency (health, family)**
- **Response**: Contractor handles day-to-day, pause new sales, maintain existing customers

---

## Monitoring & Review

### Risk Review Cadence

**Monthly**: Financial risks (cash flow, collections)  
**Quarterly**: Operational risks (churn, technical debt)  
**Annually**: Strategic risks (market, competition)

### Key Risk Indicators (KRIs)

**Financial:**
- Cash runway <90 days
- Collections >30 days overdue
- Churn rate >15%

**Operational:**
- Platform uptime <99%
- Response time >24 hours
- Customer satisfaction <4/5

**Strategic:**
- Customer acquisition cost increasing
- LTV decreasing
- New competitor launches

**Action**: If any KRI triggered, immediately review and adjust.

---

*Last Updated: December 2025*