Recently, I watched a Bill Gross (founder, Idealab) TED Talk
on the factors that help make a startup successful, or otherwise. He shared
some great insight on some of their many successes and failures. And he added
references to companies that he had not ever been associated with.
I thought to share some of his thoughts, supported by own
portfolio experience, in the hope that this will be useful to other
entrepreneurs and self-employed business professionals.
Funding
Many startups seemingly fail because they could not secure a
financing round. Actually, although often offered as a primary reason, funding
is highly unlikely to be the primary reason for business failure.
This concept may seem somewhat counterintuitive: Startups
may struggle to secure funding, but this is not the primary reason why they may
not succeed. For example, many investors ignored Airbnb originally, when they
embarked on a quest for funding.
Business Idea
Which brings us to the
idea. Some founders think because they have a great idea, it will be easier
to get funding.
However, sourcing an idea
investor is rather difficult since most Venture Capitalists (VCs) and many
Angel Investors may be looking for revenue, traction, run rate, revenue,
scalability, etc., instead.
Many great startup ideas have failed, and several successful
startups were not even really that great an idea. Not at the start anyway.
Ideas, like the people who generate them, constantly evolve.
Your final product may not even have the slightest
resemblance to your original idea. And that’s okay.
Business Model
No, a business model is not a requirement for success. Many
successes, like YouTube, did not even have a business model at the start.
And anyway, your business model, much like your original startup
idea, will also need to continuously evolve in order to accommodate shifting
consumer preferences, fads, waves.
You can create the greatest business for compact disk
distribution, but if no one is buying CDs, you will surely fail.
Team
This one crops up often. Most of the time, institutional
investors (VCs) will want to consider past results and successes, the track
records of the management team, etc.
They will want to assure themselves - before investing - that
the exec team is a powerhouse that has done
it before, and will be able to do it again! However, since most startups
begin with one or two people, a great team may not be a recipe for success.
Timing
This seems to be most critical to startup success. Now, it
would be remiss of me to claim that timing is everything, and the other factors
above are of less importance. However, timing is critical, and good timing, essential.
But, you cannot control timing. And there are many factors
entirely beyond your control.
Apple crushed Blackberry with impeccable timing. Consumers
were ready for new smartphone technologies. At the time, Jim Balsillie,
co-founder of Blackberry had famously said, “you don’t need an app for the
Web.” While Blackberry was betting on a browser as the only app one would need,
more than 300,000 apps were already available for the iPhone and iPad.
Sometimes, you cannot even control time to market timing. Development may take longer than
anticipated; vendors in a supply chain may delay product launch; etc.
I briefly mentioned traction above. This can refer to a
growing number of regular users (e.g. Facebook), regularity of existing client
reorders (e.g. when selling a product to retailers), annual SaaS user license
renewals (e.g. SalesForce).
For your startup to be successful, you need all of the
above, hard work, luck, and really good timing!
For regular #startup tweets, follow me @rudibest on Twitter.
For regular #startup tweets, follow me @rudibest on Twitter.
