The Greatest Single Factor in Startup Success

 

Bill Gross is the founder and CEO of the business incubator, Idealab. In a recent conversation in Vancouver, Mr. Gross shared his findings on what factors matter most for startup success.

The Power Startups

To begin with, Mr. Gross asserted he believes the startup model is one of the greatest ways we can make the world a better place. According to Mr. Gross, by taking the right group of people and incentivizing them properly you can unlock human potential in a way that has never been possible before. Why then do so many startups fail? And what factors matter most in startup success?

The Five Key Factors for Success

In order to answer these questions, Mr. Gross reviewed the 100’s of startups founded within Idealab and examined what lessons could be learned from both these company’s successes, as well as their failures. In so doing, Mr. Gross identified five factors he felt contributed most to a company’s success or failure. Those five factors are: idea, team, business model, funding, and timing.

A Real Life Case-Study

To determine the effectiveness of these five factors, Mr. Gross examined the impact of each factor across 100 Idealab companies as well as 100 outside companies. Mr. Gross examined companies from Idealab which had gone on to achieve billion dollar valuations, as well as those he considered to have fallen short. Likewise, when examining outside companies, he examined both companies he considered to be wild successes like AirBNB and YouTube, as well as companies which he considered to be failures like pets.com and Friendster. For all of these companies, Mr. Gross measured the impact that each of the five factors had.

The Single Greatest Factor

According to Mr. Gross’s research, across all of these companies, the number one factor was timing (42%). The second biggest factor was execution (32%), then idea (28%), business model (24%), and finally funding (14%).

Two Real-Life Examples

As an example for how these key factors played out, Mr. Gross sited, AirBNB. According to Mr. Gross, at the time of AirBNB’s launch many very smart investors wanted nothing to do with the company. Very few could see the validity in renting out their home to a stranger. The model was new and untested. However, according to Mr. Gross, one of the major advantages AirBNB had was launching during the height of the recession when people really needed extra money. This timing helped people overcome their objections to the new business of renting out their homes to strangers. According to Mr. Gross, this was the same situation which helped to contribute to Uber, which launched around the same time. 

To Sum It All Up

In summary, Mr. Gross stated that execution and idea certainly matter a lot, but that it is timing which might matter even more. According to Mr. Gross, the best way to assess timing is to thoroughly determine if customers are ready for what you are offering them. According to Mr. Gross, if you are very honest with yourself about the factor of timing, you will have a better chance of seeing your startup join the ranks of those changing the world for the better as well. 

 

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