Why startups succeed

January 25, 2016

What is it about one startup that makes it succeed over another? Surprisingly, there is far more to the question than simply having the best idea and receiving the most venture capital investment. Experts believe there are a number of factors that contribute to the success of a startup, but many agree on one major thing that affects if a startup will thrive or die: timing.

Why timing matters 
Fortune recently discussed a survey by CB Insights, which analyzed 146 failed startups. The survey found that 42 percent of the startups' founders believed they failed due to a lack of market need for their product. It does not matter how great an idea for a product is if the market is not ready for it at the time a company introduces it. 

Bill Gross, founder of startup incubator Idealab, discussed in his Ted Talk how the many other factors that influence a startup's success become irrelevant if the founders have poorly timed the introduction of their product.

Gross analyzed a number of startup companies to find that timing was the greatest factor in influencing success. If a product is introduced when the market needs it, a company will grow quickly. An example he used was Airbnb. Many investors were skeptical about providing startup funding to the company, thinking no one would want to rent their homes to strangers. But Airbnb began during the recession, when people were desperate. It was easier for customers to get over the idea of strangers using their homes because they simply needed the cash. As a result, Airbnb flourished. 

Other significant factors 
While timing is the most important, there are of course many other factors that determine if a startup will succeed. Forbes said a team made up of diverse minds and skill sets is key. With many different minds working together, it is more likely a company can make it through hard times. Forbes also said startups that have co-founders are more poised for success than those who have only one founder.  Having a partner creates a greater culture of accountability and also allows each founder to make up for skills the other lacks. 

Gross said a team's ability to execute an idea is extremely significant. He cited it as the second-most important factor, followed by the idea's uniqueness. It may seem surprising that the idea is not the most important thing, but a good idea can only grow if the customers want it and the company's team can sell it. 

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