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

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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)

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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

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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

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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)

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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

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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)

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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

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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)

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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

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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)

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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

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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)

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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)

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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)

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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

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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

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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.

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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

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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)

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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

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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.

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Last Updated: December 2025