The most important factor for startup success
“I believe that the startup organisation is one of the greatest forms to make the world a better place. But if the startup organisation is so great, why do so many fail?”
Bill Gross, TED Talk, March 2015
Bill Gross has founded multiple startups and incubated many others. He is a very talented and experienced entrepreneur and investor. In his famous talk about the reasons why startups succeed, he is trying to convince us that the single biggest reason why startups succeed is timing. The idea, team, business plan, and funds are also important, but timing is the crucial and critical factor. If you are trying to execute an idea too early or too late, your chances of succeeding are much lower.
A few days ago, I woke up at 5 am with that clear understanding of why, in my opinion, Bill’s thesis is inaccurate. So, I have decided to write this post and to try to explain myself.
We all have seen many products that came too early and couldn’t succeed because of the following:
- lack of supporting technologies (for example, it was hard to build a space shuttle in 1900)
- no need for such products (for example, a medical app in the Klingon language)
- people’s lack of readiness for a big change (for example, a space shuttle in 1900)
Ten years ago, people even in the US were not ready for the idea of smart homes. There were no smart mobile devices the Internet was not so good or fast, there was not much security, and of course, people were not ready to connect their home lighting system to the Internet and control it via Internet Explorer 6. However, now, everything has changed. We all carry smart and mobile devices, and everything is connected and mostly wireless. Everybody is talking about IoT and connectivity. Therefore, the idea of controlling my home multimedia or heating system via a mobile app while I am even not at home is entirely fine and acceptable. It may be a little bit expensive and not everything may be connected yet, but people and technologies are mostly ready for that next step.
I can give you another example. The Microsoft tablet that came out in 2002 failed. No one cared because it was too early. There were not enough WiFi points, no apps, and not enough content on the Internet, and people just didn’t know what to do with that thing. It was bad timing.
Therefore, timing is important, and it is a critical factor for success, but not for startup success.
My name is Tony Freed. I am an entrepreneur and product hacker. For over a decade, I helped startups and bigger companies to build products from an idea stage to live product. During that period, I saw hundreds, if not thousands, of startup ideas, teams, and business plans. Thus, I am not convinced that timing is the single biggest reason why startups succeed.
I’m not convinced
Timing is important, but it just says how relevant your business idea is for this particular period of time. An idea is just a starting point for the business. To build a successful business out of that idea, you have to do an enormous amount of hard work. However, first of all, you need to validate your assumptions. I can bet everything I have that if the founders do the validation in a right way, the initial idea will change quickly. Most of the time, it will change dramatically. Startup idea is a huge bunch of assumptions. Unfortunately, we are not so smart to make perfect assumptions. We have to validate them.
Market validation is one of the steps in the process of idea validating. This step requires founders to go to their potential target audience and ask them questions related to the problem entrepreneurs believe exist and want to solve with their solution.
Another step is a technology validation, which should confirm that it is technologically possible and cost-effective to build this solution within a reasonable time.
You have to be sure that you can make a product that people are willing to pay for or at least ready to use. Otherwise, it is not a business, and you cannot build a startup. If you see that technology and/or people are not ready for the kind of solution you are proposing, it means that the timing is not right or your idea is completely wrong.
I do believe that timing is the single biggest reason why ideas succeed or fail. However, it is not the reason why startups (I mean businesses) succeed or fail.
Thus, what is the single biggest reason for a startup to succeed? I believe it is the people (the team) and their ability to execute.
It is all about people.
I believe that people are always the single biggest reason for company success — not the only, but the biggest. In startups, the nature of a venture requires the founders to do an enormous amount of work and genuinely believe in what they are doing and be self-motivated. If people are not motivated enough, if they cannot work together as a team, and if they do not have the necessary skills, great timing cannot help them build a successful business. On the other hand, if they are motivated and if they can work together and execute, they will know how to deal with bad timing, wrong ideas, fundraising and business plans.
Pivoting and quick response
The great team can move fast in response to market feedback, generate creative ideas and not stick with the initial assumptions. They know that they are building a business and not just executing an idea. So, if the idea or timing is not good enough, they will change the idea. They will start over and try again.
“To improve is to change; to be perfect is to change often.” Winston Churchill
Do you remember the initial ideas of Flicker, Instagram or Twitter? If not, I will remind you.
Flickr began as an online game where users could interact with other users and buy, sell and build items. That game also included a photo-sharing tool, which turned out to be one of the most popular aspects of the game. As you know, the company decided to go with this photo tool and pivot to Flickr. It was acquired by Yahoo! in 2005.
Odeo into Twitter is probably the most legendary pivot in social media history. Odeo began as a network where people could find and subscribe to podcasts. After iTunes had started taking over the podcast niche, the founders thought that they had no chance to compete with Apple. They gave the employees two weeks to come up with new ideas. Eventually, the company decided to make a drastic change and run with the concept of a status-updating micro-blogging platform.
Instagram began as Burbn. It was check-in app that included gaming elements from Mafia Wars. It also had a cool photo tool. The creators worried that Burbn would never gain traction, so they took a risk and stripped all the features but one: photos.
In all three examples, the initial idea did not work out. However, the teams were motivated and creative enough, and by working together, they were able to respond quickly and build billion-dollar companies.
Founders and employees who want and know how to work together as a team have more chances to succeed. It is particularly important for startup founders. You can hire an employee who may not fit the team. It happens a lot even if you are very serious about interviewing and hiring the best. You can alway let him or her go if he or she does not fit. It is fine. However, letting go of a co-founder is an entirely different story. Usually, it means the end of the startup.
I believe that no matter what tools we use and what management style we implement in our companies, the only thing that matters is respect. Respect may come in different forms. Self-respect means working hard, doing whatever it takes, and being honest regardless of the situation. Teammates’ respect means understanding people’s needs and wants and respecting their privacy, time and space, style of work, opinions, and decisions.
Teams that respect each other work better together and have more productive meetings, which leads to better and faster decision making. Teams whose members respect each other are more creative regardless of their actual knowledge and experience. Such teams can make a fast and sharp pivot, change business plan, and find creative ways to overcome almost any situation.
Bad timing, wrong assumptions, and fundraising are less of a problem when you have a great team.
There are many reasons why startups fail. Also, there is no framework to build a successful business. It depends on so many things that also change all the time. The idea may change, the business plan will change for sure, and the startup may be well funded or not. However, if you do not have a team of smart enough believers who respect each other, you have no chance. That is why the most important factor for startup success is people who are working for its success.