Starting a business from scratch is a daunting prospect. No matter how sure you are of your company’s potential, there are many factors, some of which will be out of your control, that could derail a business before it’s even begun. However, the rewards for startup success are also enticing, and not only in financial terms.
Startups are great breeding grounds for innovation, possessing the potential to disrupt traditional businesses and wrestle entire industries out of stagnation. They are opportunities for individual entrepreneurs to turn their visions into realities without having to seek approval from larger corporate influences. But for every startup success there are many more failures, so understanding why some companies thrive and others fizzle out is crucial.
Perhaps the first factor to consider, although not necessarily the most important, is the idea behind the startup – specifically, whether or not it’s any good. Founding a startup is by its very nature a leap in the dark, but some leaps have more stable foundations than others. It may be easy to say with the benefit of hindsight, but a cat-shaped barcode scanner with some questionable security protocols is unlikely to prove a runaway success. Conversely, the idea is not always the deciding factor between success and failure – plenty of digital companies have fallen by the wayside despite being based around a seemingly excellent idea. So what else do startups need to get right?
Alongside a good idea, companies also need a good team of individuals to help bring it to life. For most startups this is likely to consist of just of handful of people that buy into your company’s vision. They will need to be passionate and determined to cope with the huge amount of work required to get a business off the ground and it will also prove useful to have skills in certain areas, such as marketing or finance. The right mix of personalities also plays a key role in startup success. Companies need individuals that are willing to put ideas forward, encourage debate and speak their mind, however startups must be careful not descend into disputes and in-fighting.
In addition, startups need a sound business model to not only ensure that they are heading in the right direction, but also to give investors confidence in their future. Are you going to sell products at the lowest possible price to expand your market share initially, or provide a luxury service at a premium cost? How are you going to target your audience? There are many different ways to shape a successful startup and it’s up to each individual company to convince investors that theirs is the right one.
However, one of the most overlooked factors regarding startup success is timing. Even if you have a great idea, a fantastic business model, willing investors and a professional team of employees, sometimes things don’t go to plan. It may be incredibly deflating, but it could simply be that the time was not right for your business to thrive. Perhaps the consumer isn’t ready for your product or service, or maybe supporting technologies are not yet reliable enough – there could be a number of reasons why some businesses fail despite having all the right ingredients.
As Bill Gross, a US entrepreneur, explains in his recent TED Talk, the digital age has seen many startups fail only to be replaced by one based on a very similar idea a few years down the line. YouTube has become the number one video content site in the world, but prior to its launch in 2005 many other similar sites were founded and eventually faltered, often due to inadequate broadband penetration and video streaming software. The idea behind YouTube was excellent, but perhaps the timing was even more crucial. Similarly, Airbnb was overlooked by many investors following its launch in 2008, with many doubting whether people would be willing to share their homes with strangers. Just a few years later, the sharing economy was in full swing and Airbnb had raised more than $7 million in venture financing.
Startups with dreams of long-term success need to look outward, as well as inward when evaluating their likelihood of success. Is the cultural, social and economic climate right for your product? Most important of all, is the consumer ready? It’s impossible to know the answers to these questions with complete certainty, but if you at least give them some consideration your startup stands a better chance of succeeding where others have failed.