The Single Biggest Reason Why Start-ups Succeed (according to Research)
Only one in five new businesses are successful in their first year of launch (according to the US Bureau of Labor Statistics). Less than 1 percent of those eventually become unicorns (privately held firms with over $1B capitalization), such as Airbnb, Stripe, SpaceX, Robinhood, and Uber.
With over 150 million startups globally, What one factor matters the most regarding start-ups’ success in the present business world? It turns out that it is not your usual first guess.
The single biggest reason why a start-up might succeed can be distilled into one word – TIMING.
Bill Gross, founder of Idealab gives us some insight into why Timing is the most critical element, with data to support the fact.
IdeaLab has helped in the start-up of over 100 companies in the past three decades, with various degrees of success (and failure) in each of them.
Their data might be helpful for you to re-evaluate your priorities regarding starting a new company and improve your odds of launching a successful start-up.
Factors that accounted the most in the Success of Start-up Companies
IdeaLab lists the following 5 important elements that will make or mar a business right from the onset.
- The Business Idea – what need is the business trying to meet; product or services? Which problem is it catering to?
- The Team – Who are those behind the scenes pushing the business forward? What are their skills, their adaptability, their execution
- Business Model – Does the company have a clear path to generating revenue from the customers?
- Funding – How much funds are available to execute the business plan
- Timing – Is the business idea too early or too late to kick off now? Is this the right time for it?
Here is what the data (for ideaLab companies and non-idealab companies) says about the most important of these essential elements to the success of any start-up.
Top 5 Factors In Success Across More Than 200 Companies
| 1. | Timing | 42% |
|---|---|---|
| 2. | Team/Execution | 32% |
| 3. | Idea | 28% |
| 4. | Business Model | 24% |
| 5. | Funding | 14% |
Timing accounts for 42 percent of the difference between a successful start-up and one that failed. It is way ahead of other essential factors like – Idea, Team, Business Model, and Funding. Surprisingly, funding was the least essential of the five factors under consideration.
Why is Timing the Most Important Factor
An Idea will matter more when it is properly timed. Launching a business when the market isn’t ready for it will not yield a successful outcome.
You could start a business without a business model and add one when your customers are demanding what you are creating.
You can also start a business first without much funds, and get then excess funds as you gain traction. There are lots of investors, heavy with cash, that will be willing to give your business the funding it deserves.
More often than not, funding is not always the priority for investors. It should come easy if other things are in place.
Airbnb was famously ignored by investors because the idea of people renting out a space in their homes to a stranger was, at the time, ridiculous. But things changed when Airbnb launched during the height of a recession – when people really needed some extra money. The timing was perfect.
The same argument can be made for Uber, it was launched when the drivers needed some extra cash. Coupled with a great business model and execution.
Z.com – an online entertainment company launched in 1999-2000, failed in 2003. It was a great business idea and model and had good funding but the timing wasn’t just right. Broadband technology was poor in 1999-2000, making it difficult to watch video content online.
YouTube was perfectly timed and market-ready, just 2 years after Z.com failed. Broadband Penetration was better in 2005 and online video content was pleasant by that time.
Conclusion
The idea, funding, team, and business model are all essential components for start-up success, but the timing might matter even more. The odds of success will increase when you launch at a time when the customers are ready for your products or services.
See 6 Mindsets on Being a Successful Entrepreneur – John Mullins Highlights
