Using the cost-risk matrix to answer every startup’s biggest question

Here’s the 3-step process I use when helping startups evaluate and prioritize opportunities

John Zeratsky
6 min readNov 7, 2022


Startups are super risky, never have enough time, and are obsessed with speed. As a result, the biggest question they face in any given moment is: “What should we do next?”

At Character, I talk to startup founders every day. When the subject turns to prioritizing opportunities — essentially trying to answer that “what next” question — I always follow the same three-step process…

Step 0: Is this opportunity valuable?

Just kidding, there are four steps because I started at zero! Gotcha! See, I still remember something from CS classes in college 🤓

This is an important pre-question. None of us should spend time on things that aren’t valuable. We may not always have that ability, but startups do: They are structured to focus on valuable opportunities all the time!

The answer to this question can be easy. The team may already know whether a given opportunity is valuable, or it may be obvious.

When it’s not easy, we sometimes run an Opportunity Sprint with the team to decide which opportunities to pursue. I promise to one day share our detailed guide and Miro template for the Opportunity Sprint, but for now I’ll summarize the process as:

  1. Establish what we care about as a company and as individuals (our customers, goals, etc).
  2. Capture all opportunities under consideration in a format that’s sufficiently detailed and concrete.
  3. Get a gut check from the team on which opportunity is most promising.
  4. Gather criteria we can use to prioritize each opportunity (“we should prioritize this opportunity because it’s ___________”).
  5. Evaluate each opportunity with each of the criteria — the “winning” opportunities are those that score most highly on the most criteria.

Once we’re sure a particular opportunity is valuable, we have to figure out what to do with it. This is where I like to look at the relationship between cost and risk.

Step 1: What’s the cost-risk relationship?

Cost-benefit is the classic first way to evaluate an opportunity, but I don’t think it’s super helpful for startups.

Much more interesting to me is the cost-risk relationship.

There’s a two-axis plot I’ve been using for years to evaluate this. I think I originally picked it up from Braden Kowitz, my longtime colleague and mentor at GV.

It’s super simple:

To start, position one or more opportunities on the plot.

You may be wondering, How do I evaluate cost and risk for each opportunity? Here’s some advice:

  • Use your gut.
  • Don’t overthink it.
  • Remember, at a startup, cost = time (you’re likely not spending money on anything but salaries!)

As a founder or early employee, you probably have a deep and well-tuned intuition about cost and risk, so lean on that and drop your pin.

You can plot multiple opportunities at a time, but even one is illuminating.

Step 2: What zone are you in?

Imagine you’re considering an opportunity in the low-cost band…

This is the “just do it” zone. Risky or not, if the cost (= time to complete) is low enough, you can just do it and find out.

In the lower left are mythical “low-hanging fruit” or “quick wins”. The lower right is where the hardcore lean-startup/MVP people hang out— though they often learn that most things take way longer to build than expected, bumping them out of the Just Do It zone 😇

Sometimes you’ll consider opportunities in the upper-left quadrant: High cost but low risk.

These are somewhat rare, but do exist. Some examples:

  • “Table stakes” features (which you need to build because all of your competitors have them)
  • Direct customer requests (which are so overwhelming and consistent you feel like the risk is low)
  • Infrastructure or “technical debt” projects (maybe you need to rebuild your back-end to scale more efficiently; it’s valuable, it’s going to take a while, and it’s pretty low risk as long as your engineers are good!)

This is the “decide and commit” zone — probably the least sexy part of this plot, but where a lot of important startup work happens.

Our portfolio company House Rx thrives in this zone. They enable specialty medical clinics to launch in-house pharmacies. To deliver on this, they built modern pharmacy management software and a scalable pharmacy operations team. Both are tough to get right, and very costly, but neither one is totally risky from a product or technology standpoint.

The upper-right quadrant is the most important for startups — but it’s also the least understood. It’s where cost (and remember cost = time at startups) and risk are both high.

It’s pushing into a new market. Speculative new features. New applications for frontier tech. When we think about the startup dream and industries transformed by technology, we’re in this zone. The moonshot. The hail mary. The grand slam.

But when costs and risks are high, great founders resist the urge to step to the plate and take a powerful swing.

Instead, they know it’s time to methodically validate their assumptions and de-risk the opportunity. Because the cost is so high, they may only get one at-bat.

This is the “test and learn” zone.

We love to run Design Sprints here, to help startups make sure they’re on the right track before going all-in on execution.

Our portfolio company Phaidra is a great example, who used Design Sprints to de-risk their AI for factory controls. Or Fathom, where we ran sprints to design and test a dramatically simpler new product experience (including AI summaries) before rolling it out to all customers.

There are lots of other ways to test and learn (I summarized a bunch here), but the key thing is knowing which zone you’re in before pushing forward.

Step 3: Act accordingly

Most big startup mistakes come from prioritizing opportunities in one zone, but acting like you’re in another.

I’ve seen over and over — both in pitches and in working with startups — that many founders think they are in the “Just Do It” or “Decide & Commit” zone when in fact they are in “Test & Learn.”

In other words, they think the cost is low (we’ll have this live next week) or the risk is low (we know people want this) — when one or both is untrue.

At GV, I worked briefly with Juicero, which became a ludicrous warning about what happens when you Decide & Commit instead of Test & Learn.

At Character, we have one portfolio company (sorry, I can’t say which!) who over-committed to building features, thinking each one was low-cost and low-risk. Later, they had to pause and go back to clean up.

Stay in the zone

These frameworks are never perfect and always over-simplify, so your mileage may vary.

But I’ve found this one useful in helping startup teams understand how to approach the opportunities in front of them. In other words, helping them figure out what to do next — the most important decision for every startup.

— JZ



John Zeratsky

Supporting startups with capital and sprints. Co-founder and general partner at Character. Author of Sprint and Make Time. Former partner at GV.