Why Do Startups Succeed?

startup3

 

One of the most common questions I am asked is, “what has differentiated the startups you’ve seen succeed from those that haven’t?” The answer to that question addresses the fundamental criteria an investor would use to evaluate a startup’s chances for success. I explored my personal experiences at startups including the following:

The companies that “made it big” had the same three traits, the companies that “made it biggest” had the most of those traits, and those that never quite made it had the least. I contend that the following is the formula for a successful startup:

The right team

with the right product

at the right time

 

1. The Right TeamSV

If I have to bet on one thing, it’ll always be “team”. The right team “works hard and smart”; the right team responds to failures with timely pivots; the right team can move the product in the right direction; the right team can see around corners and make course corrections as necessary. It’s really hard to imagine a successful startup that doesn’t have the right team. And when you meet “the right time,” you immediately know it. For more on this, though, please feel free to read my earlier post on the topic: The 4 Stages of a Great Employee.  If I was fortunate enough to work with you at any of the companies listed above, please count yourself amongst the ranks of “the right team”.

 

2. With the Right Productold

It didn’t take me much time with an original iPhone to recognize it was something special and awesome. I felt the same way when I first saw Siebel Systems’ CRM system in 2000, or Omniture’s web analytics platform in 2005. They were special products; they were the “right product”.

Building the right product is not easy, and that’s what makes it so critical. The “right product” must: 1) meet a need or solve a problem I have, 2) do so in a way that’s better than any alternative I’ve got, and 3) do all of this while being cost-effective to buy and profitable to sell. There are countless products out in the market today that fit these criteria, but I’ll leave it to you to identify them.

 

3. At the Right Timefuture2

Boy is this last criterion hard: an awesome product before its time is no good. We all remember the Apple Newton or the GM EV1 electric car; they were both arguably awesome products that were simply too early for market acceptance.

Startups must focus on products that can ride macro trends and waves sweeping the market. In the late ’90s, most large enterprises had Y2K initiatives replacing their ERP and back-office systems, a wave that IBM Global Services rode with enormous success; the early 2000s were about the front-office and CRM systems, a wave that Siebel Systems rode until ats acquisition by Oracle; Omniture road the digital analytics wave from the mid-2000s until it was acquired by Adobe in 2009. What waves do you see right now and is your startup riding one of them?

 

When evaluating a startup, ask yourself how you’d rate their team, their product, and their market timing.

 

 

 

One thought on “Why Do Startups Succeed?

  1. Great post Bassam! Not only are these the reasons that startups succeed, they are also reasons that existing ventures stay successful.

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