What makes a startup successful?

Within the venture community, there are a lot of debates about what makes a startup successful. With the normal venture framework, investors tend to look at several dimensions:

  • Targeted Market
  • Founding team
  • Differentiated business model
  • Unique (unfair) competitive advantages
  • IP barriers around innovation and patents
  • Scaling / Operational efficiency
  • Existing Financing Backing
  • … much more

After funding quite a lot of startups over the years, I think it really depends on the stages of the startup. The early the startup is, the more it is about the people and market. When the company is small, it needs to select a big problem and a big market, but narrow the approach down to an execution path that can optimize the outcome quickly with limited resources. Speed is the key and team execution is paramount. The ability to execute is the winning factor. As the company matures over time, the emphasis shifts more into other factors such as proven business model, operational efficiency and barriers of entry. These factors do not come set in stone, they optimize over time. It is an evolution, not a revolution process.

Timing also plays a key role in startup success. The timing itself defined the outcome within the target market. If it is too early, the market is very immature, technology is not ready and there is no ecosystem a startup can leverage on. In this scenario, it is almost like lighting a match to heat up the ocean, regardless of how much VC funding a startup gets. it can’t be successful. On the other hand, if it is too late, there are already many competitors including big companies in the market. It is too crowded, especially when there are already some leading vendors that capture big enough market shares. Even when the startup can build a reasonable niche market, it is hard to turn it into a scalable platform. Bill Gross, the founder of idealab, has once done a study of 200 startups, 100 idealab companies and a 100 non idealab companies. What he found out is that timing is the most important factor. You can watch his TED talk here.

What success factors do you think are the most important for startups? It would be great to hear back from you.

Johnny is a successful entrepreneur and angel investor with several startup exits. He was the co-founder and CEO of Net Beyond where he led the first business financing, negotiation and eventually M&A exit. Johnny is also a global angel investor who actively incubates and funds startups that span across North America and the Asia Pacific.

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