It's difficult for many entrepreneurs to hedge, particularly young or first-time entrepreneurs, because a supermajority of their net worth is in their company. If you own a software company and have $10k in your IRA there is <i>no option available</i> which causes that IRA to suddenly be worth an appreciable portion of the value of the software company given some event which severely compromises the worth of the software company.<p>The best option available if you're concerned about sector-specific or firm-specific risk is to decrease your exposure to your own company. For example, if your company has already created tangible economic value, you'd do something like a secondary sale while raising a new equity round, such that part of the round goes into your pocket rather than the company's coffers. You'd then take that money and then do anything other than putting it into a high-growth tech company.<p>This is becoming much more common than it used to be, to my understanding. Historically VCs preferred to have founders be "hungry for an exit" (which was, ahem, so that VCs would have a superior negotiating position), but these days social acceptability of cashouts is increasing as a) the market favors entrepreneurs and b) VCs are starting to cotton onto the fact that early acquisition offers (which murder VC returns) are radically more attractive when you have $600 in your checking account than when you can comfortably contemplate e.g. a wedding, childbirth, or a home purchase (well, OK, maybe not a home purchase in the current real estate market) without suffering crippling amounts of financial anxiety.<p>Given that one has a non-trivial portion of their net worth outside the company, there exist options for hedging, but given that you're probably better at selling software than on financial alchemy you should probably stick with what you're good at.<p>That said, you might do something like I did, which was e.g. pick a publicly traded company which would get shellacked if your sector got hit and buy deeply out-of-the-money puts on them. (I picked Salesforce and spent ~$500 on an options position which pays out only if they either have Enron-sized accounting issues or SaaS gets punched in the face. It expired valueless. I'd have re-upped it for another year but didn't anticipate my net worth and professional career to both be 90%+ SaaS-weighted for most of this year.)