SINGLE MOST IMPORTANT REASON FOR THE STARTUPS TO BE WILDLY SUCCESSFUL
I believe that the startup organization is one of the greatest forms to make the world a better place. If you take a group of people with the right equity incentives and organize them in a startup, you can unlock human potential in a way never before possible. You get them to achieve unbelievable things.
So I tried to look across what factors accounted the most for company success and failure. So I looked at these five. First, the idea. I used to think that the idea was everything. I worship the "aha!" moment when you first come up with the idea. But then over time, I came to think that maybe the team, the execution, adaptability, that mattered even more than the idea.
Boxer Mike Tyson once said, "Everybody has a plan, until they get punched in the face." And I think that's so true about business as well. So much about a team's execution is its ability to adapt to getting punched in the face by the customer. The customer is the true reality. And that's why I came to think that the team maybe was the most important thing.
Then I started looking at the business model. Does the company have a very clear path generating customer revenues? That started rising to the top in my thinking about maybe what mattered most for success.
And then of course, the timing. Is the idea way too early and the world's not ready for it? Is it early, as in, you're in advance and you have to educate the world? Is it just right? Or is it too late, and there's already too many competitors?
So I tried to look very carefully at these five factors across many companies. And I looked across all companies that were in news for the right or wrong news – started around 2005 and later, to try and come up with something scientific about it.
So I tried to rank across all of those attributes how I felt those companies scored on each of those dimensions. I looked at wild successes, like Airbnb and Instagram and Uber and Youtube and LinkedIn and Watsapp.
And some failures: The companies had intense funding, they even had business models in some cases, but they didn't succeed. I tried to look at what factors actually accounted the most for success and failure across all of these companies, and the results really surprised me.
The number one thing was timing. Timing accounted for 42 percent of the difference between success and failure. Team and execution came in second, and the idea, the differentiability of the idea, the uniqueness of the idea, that actually came in third.
Now, this isn't absolutely definitive, it's not to say that the idea isn't important, but it very much surprised me that the idea wasn't the most important thing. Sometimes it mattered more when it was actually timed.
The last two, business model and funding, made sense to me actually. I think business model makes sense to be that low because you can start out without a business model and add one later if your customers are demanding what you're creating. And funding, I think as well, if you're underfunded at first but you're gaining traction, especially in today's age, it's very, very easy to get intense funding.
So now let me give you some specific examples about each of these. So take a wild success like Airbnb that everybody knows about. Well, that company was famously passed on 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 the reasons it succeeded, aside from a good business model, a good idea, great execution, is the timing.
That company came out right during the height of the recession when people really needed extra money, and that maybe helped people overcome their objection to renting out their own home to a stranger.
Same thing with Uber. Uber came out, incredible company, incredible business model, great execution, too. But the timing was so perfect for their need to get drivers into the system. Drivers were looking for extra money; it was very, very important.
Just two years later, when the codec problem was solved by Adobe Flash and when broadband penetration crossed 50 percent in World, YouTube was perfectly timed. Great idea, but unbelievable timing. In fact, YouTube didn't even have a business model when it first started. It wasn't even certain that that would work out. But that was beautifully, beautifully timed.
So what I would say, in summary, is execution definitely matters a lot. The idea matters a lot. But timing might matter even more. And the best way to really assess timing is to really look at whether consumers are really ready for what you have to offer them. And to be really, really honest about it, not be in denial about any results that you see, because if you have something you love, you want to push it forward, but you have to be very, very honest about that factor on timing.
As I said earlier, I think startups can change the world and make the world a better place. I hope some of these insights can maybe help you have a slightly higher success ratio, and thus make something great come to the world that wouldn't have happened otherwise.