The Single Biggest Reason Why Your Startup Will Succeed or Fail

on October 27, 2016

On average, 50 percent of new businesses will not survive beyond their fourth anniversary. Companies in mining, manufacturing, construction, retail, transportation, communication, and utilities have even lower survival rates.

There are countless theories about why a company may go under.

IdeaLab’s Founder Bill Gross has launched and invested in more than 125 companies in his career. In his 2015 TED Talk, he shared the single most important factor that he has discovered that matter most to a start-up’s success or failure.

Bill started IdeaLab because he has always been enamored with the idea of ideas. Few things excite an entrepreneur more than that initial jolt of excitement we experience when we think, “I can change the world with my idea, and it’s never been done this way before.”

As IdeaLab grew, and became the home to more than 100 companies, Bill realized that it isn’t the idea that makes a company thrive or die. He soon discovered that perhaps it is the team – the people – that is instrumental to a start-up’s success.

While having the right people in the right seats is vitally important, Bill soon began to evaluate the importance of the business model. How will the company reach the market and drive revenues?

This thinking led Bill to examine funding. Surely access to capital is a critical component of a start-up’s success.

Idea. People. Business model. Funding. Did any of these manifest as the single most important factor for success?

No.

Bill looked at his top five highest performing companies: Citysearch; CarsDirect; GoTo;NetZero; and Tickets.com. They all became billion dollar successes.

Then he looked at his five biggest failures: Z.com; Insider Pages; MyLife; Desktop Factory; and Peoplelink.

Then Bill evaluated additional non IdeaLab success stories, including two industry disruptors: AirBnB, and Uber, as well as spectacular failures, including Webvan, Kozmo, Pets.com, Flooz, and Friendster.

The single greatest predictor of success or failure – for every business he evaluated – was timing.

AirBnB defied all conventional thinking. It had no funding, it had a sketchy business model, and the idea was definitely risky. However, the company launched during the height of the recession when people needed extra money. Its success directly reflects what the market needed, and was able to adopt, at the precise point in time of the launch.

The same phenomena occurred with Uber. Money was tight, and so the idea of making your wheels work for you was very attractive to individuals looking to make additional money.

Timing was everything.

In one of the best motivational movies ever made, “Any Given Sunday,” Al Pacino’s pre-game speech nails the concept of timing.

“Life is a game of inches. The margin for error is so small. One half a step too late or too early, and you don’t quite make it… one half-second too slow or too fast, you don’t quite catch it. The inches we need are everywhere around us…. when we add up all of those inches, that’s going to make the difference between winning and losing…. between living and dying.”

Ideas are great. Awesome people are a must. Money is essential. A solid business model provides a clear path to profits.

None of these will matter, however, if the market doesn’t need your product or service, and if they can’t adopt your idea precisely when you launch it. How’s your timing, and are you capturing the inches you need to make the difference between living and dying?

Good luck!