Why Do Some Startups Succeed While Others Fail?
The world of business gets a bad reputation for being cutthroat. Listening to the pundits, you get the impression that it really is a dog-eat-dog world where only the toughest survive. But is this really the case? Probably not.
More often than not, it’s not the competition that destroys the business. It’s the founders themselves (or their staff). In other words, the world of business might be “dog-eat-dog” but the dog isn’t being eaten by another dog. It’s eating itself.
Right now, something like 80 percent of startups fail in the first twelve months. It’s an appalling statistic that belies the real scale of wasted human effort. Surely there is something that we can do about it?
They Don’t Go It Alone
Have you ever noticed how few startups has a single founder? It’s an interesting observation that gets more interesting the more you think about it.
Companies like Google and Uber were all started by multiple people. And they’ve since grown into enormous enterprises with global appeal.
Google in particular essentially began when a couple of kids in their dorm room decided to revolutionize the world of search.
Is it just coincidence that successful businesses have multiple founders? Well, probably not. It shows that the person with the idea was able to talk their friends into joining them in business.
It’s like a filter that separates the founders with the good ideas from the founders with bad ideas. The founders with good ideas generate a following. The founders with bad ideas have to go it alone. And they’re not always successful.
But even if the sole founder’s friends were all wrong, he or she still faces challenges. For one, there’s less diversity of skills. A single founder can’t know as much as two people with different skills and life experiences. And a sole founder can’t possibly have the perspectives of two people.
And then there’s the element of accountability. When a founder forms a company with his or her friends, they don’t want to let each other down. Perhaps some days they feel like slacking off. That’s not something that you can just go and do if the result is letting down your friends. The power of guilt drives people to work harder when they work in a group.
They Stay Up To Date With Industry Trends
It’s all well and good having a great business idea, but what if the world isn’t ready. In business, timing is everything. Before launching a product, you have to predict whether the whole ecosystem that makes that product viable will be in place. And that’s often where businesses come unstuck.
Perhaps you have a great business idea that involves using graphene to make auto parts. Great. Except, there’s a snag. Graphene is nowhere near ready for mass production right now. And even if you did manage to get a contract with an automaker, it’d be unlikely you’d be able to supply the parts demanded for at least a decade.
What’s more, trends in industry change quickly. One minute everybody is texting using SMS, the next they’re using Snapchat. That’s why it’s worth going through sites like digitalbusinessmags.com and finding industry-relevant content. Hundreds of useful magazines are now cataloged online, waiting to be read by founders.
They Choose The Right Locations
It might not seem that location is all that important in the digital age. After all, we can just communicate with each other whenever we live over any distance online. But that’s clearly not how most startups see it. In fact, where startups actually start up tells us a lot about their priorities.
Right now in the US, Silicon Valley is where you’ll find the most start ups. For reasons we will discuss in a moment, startups per capita here are higher than in any other part of the country. Next is Boston, presumably because it is a center for learning and for emerging industries, like robotics. And after that are the traditional, innovative centers, like New York, Seattle, and Austin.
Startups value location a lot because it’s their location that gets them closest to the expertise they need. Startups in Silicon Valley need programmers. So what would be the point of setting up in Mobile, where there are no programmers? This clustering – or being close to your competition – is actually beneficial. And it’s why startups should look to find their own hubs. Even if they’re not in the software industry, they’ll still find hubs up and down the country for a variety of industries.
They Don’t Focus On Small Niches
Many startups comes to the game believing that they have to design something fundamentally new. And while it might be nice to think that you could, it’s highly likely that somebody else is already doing it. In fact, if it is a good idea, you’d hope somebody else was already doing something.
The problem with marginal niches is that they’re not all that great at generating revenue. At the same time, they need a huge marketing budget to find the few people who will truly benefit.
They Don’t Focus On Derivative Ideas
When you consider the companies that have gone on to have international success in recent years, you notice something. They all brought something that was fundamentally new to the market.
Google gave us the world of search. Facebook gave us social networking. Uber gave us feasible ridesharing. All of these companies had their competitors. Yahoo and Alta Vista faced off against Google in the early days. MySpace went up against Facebook. And Uber now faces competition in China and elsewhere.
But having said that, these companies all had something in common. They were all on the cusp of something new that would be truly transformative. Right now you could say that we should be getting excited by artificial intelligence. Or, indeed, firms that are involved in 3D printing.
It is these startups that we might expect to succeed, where others failed. And that’s because it is these startups who are actually building the future, and not muscling in on the past.