I’m really excited to share with you some findings that basically surprise me about what makes companies succeed probably the most, what factors actually matter probably the most for startup success. I feel that the startup organization is one of many greatest forms to really make the world a much better place. For several individuals with the proper equity incentives and organize them in a startup, you are able to unlock human potential in ways nothing you’ve seen prior possible. You cause them to achieve unbelievable things.
However, if the startup organization is indeed great, why achieve this many fail? That’s what I needed to find out. I needed to learn what actually matters most for startup success. And I wanted to try to be systematic about any of it, avoid some of my instincts and maybe misperceptions I have from so many companies I’ve seen over the years. I needed to understand this because I’ve been starting businesses since I was 12 years old when I sold candy at the bus stop in junior senior school, to senior school, when I made solar energy devices, to college, when I made loudspeakers.
And when I graduated from college, I began software companies. And 20 years ago, I began Idealab, and within the last 20 years, we started over 100 companies, many successes, and many big failures. We learned a great deal from those failures. So I tried to look across what factors accounted probably the most for company success and failure. So I looked over these five. First, the idea. I used to believe the concept was everything. I named my company Idealab for simply how much I worship the “aha!” moment when you produce the idea. But over time, I came to believe maybe the team, the execution, adaptability, that mattered much more than the idea. I never thought I’d be quoting boxer Mike Tyson on the TED stage, but he once said, “Everybody has a plan, until they get punched in the face.” (Laughter) And I do believe that’s so true about business as well.
So much of a team’s execution is its ability to adapt to getting punched in the face by the customer. The client is the real reality. And that’s why I came to believe the team maybe was the main thing. Then I began looking at the company model. Does the company employ a clear path generating customer revenues? That started rising to the utmost effective in my own considering maybe what mattered most for success.
Then I looked over the funding. Sometimes companies received intense levels of funding. Maybe that’s the main thing? And then of course, the timing. Is the concept much too early and the world’s not ready for it? Is it early, as in, you’re beforehand and you’ve to educate the planet? Is it perfectly? Or could it be too late, and there’s already too many competitors? So I tried to look cautiously at these five factors across many companies. And I looked across all 100 Idealab companies, and 100 non-Idealab companies to use and produce something scientific about it.
So first, on these Idealab companies, the utmost effective five companies — Citysearch, CarsDirect, GoTo, NetZero, Tickets.com — those all became billion-dollar successes. And the five companies on underneath — Z.com, Insider Pages, MyLife, Desktop Factory, Peoplelink — we all had high desires for, but didn’t succeed. So I tried to rank across all those attributes how I felt those companies scored on each of these dimensions.
And then for non-Idealab companies, I looked over wild successes, like Airbnb and Instagram and Uber and Youtube and LinkedIn. And some failures: Webvan, Kozmo, Pets.com Flooz and Friendster. Underneath companies had intense funding, they even had business models in some instances, however they didn’t succeed. I tried to check out what factors actually accounted probably the most for success and failure across most of these companies, and the outcomes really surprised me. The top thing was timing. Timing accounted for 42 percent of the difference between success and failure. Team and execution came in second, and the concept, the differentiability of the concept, the uniqueness of the concept, that actually came in third. Now, this isn’t absolutely definitive, it’s not to say that the concept isn’t important, but it greatly surprised me that the concept wasn’t the main thing.
Sometimes it mattered more when it was really timed. The past two, business design and funding, made sense in my experience actually. I do believe business design makes sense to be that low because you can start out without a business model and add one later if your visitors are demanding what you’re creating. And funding, I do believe as well, if you’re underfunded in the beginning but you’re gaining traction, especially in the current age, it’s very, quite simple to get intense funding.
So now i’d like to offer you some specific examples about each of these. So take a wild success like Airbnb that everybody knows about. Well, that company was famously handed down by many smart investors because people thought, “No one’s going to rent out a space in their home to a stranger.” Of course, people proved that wrong. But one of many reasons it succeeded, apart from a good business design, a good idea, great execution, could be the timing. That company arrived right through the height of the recession when people really needed extra cash, and that maybe helped people overcome their objection to renting out their very own home to a stranger.
Same thing with Uber. Uber arrived on the scene, incredible company, incredible enterprize model, great execution, too. However the timing was so ideal for their have to get drivers into the system. Drivers were looking for additional money; it was very, very important. A few of our early successes, Citysearch, arrived on the scene when people needed web pages. GoTo.com, which we announced actually at TED in 1998, was when companies were trying to find cost-effective techniques for getting traffic. We thought the theory was so excellent, but usually, the timing was probably maybe more important. And then some of our failures. We started a business called Z.com, it was an on line entertainment company. We were so stoked up about it — we raised enough money, we had a good enterprize model, we even signed incredibly great Hollywood talent to become listed on the company. But broadband penetration was too low in 1999-2000. It absolutely was too much to view video content online, you’d to put codecs in your browser and do all of this stuff, and the company eventually sought out of business in 2003. Just 2 yrs later, once the codec problem was solved by Adobe Flash and when broadband penetration crossed 50 percent in America, YouTube was perfectly timed.
Good plan, but unbelievable timing. In reality, YouTube didn’t have a small business model when it first started. It wasn’t even sure that that would work out. But which was beautifully, beautifully timed. What exactly I would say, to sum up, is execution definitely matters a lot. The idea matters a lot. But timing might matter even more. And the best way to essentially assess timing is to essentially look at whether consumers are really ready for that which you have to offer them.
And to be really, really honest about this, not maintain denial about any results that you see, because when you yourself have something you adore, you wish to push it forward, nevertheless, you need to be very, very honest about that factor on timing. As I said earlier, I believe startups can alter the planet and make the planet an improved place. I hope some of these insights can maybe help you’ve a somewhat higher success ratio, and thus make something great come to the planet that wouldn’t have happened otherwise. Many thanks quite definitely, you’ve been a good audience.