5 factors determining the development of startups
Bill Gross has been launching companies and running small businesses since he was 12. He started from the sale of candies, eco projects, working with software, and finally took charge of his own business incubator.
Years later, he used his experience to find out what makes young projects successful. He determined 5 factors which became a base for the investigation.
- The Idea
- Team
- Business model
- Funding
- Time of launch
Each factor on its own is critical for launching a project. In particular, Bill Gross decided that the idea means everything, you cannot launch a startup without a good team, and an effective business model lets you stay onboard. He considered continued investments and operational efficiency to be also important — it’s vital to launch the project at the right time and for it not to lose its originality and relevance.
So which factor appeared to be more important?
Results of data analysis of 200 companies
Bill Gross investigated companies by taking into consideration 5 factors mentioned above. Each startup was valued 1 to 10 points.
He added 100 companies from the IdeaLab incubator and another 100 companies he chose from the market.
From the first group of companies, Citysearch, CarsDirect and other companies became «A level students». Their incomes are assessed in billions. At the end of the list are failed projects like Z.com and Insider Pages. Their points are presented in the following image.
In the second hundred the leaders were services for booking apartments and taxis as well as video hosting and social networks. The analysis ended up with companies that despite the investment, went bankrupt. Take a look at the image:
Having counted the points, we could now see the full picture, and interesting conclusions were made from the information gathered.
42% of a startup success depends on launching at the right time. Another 32% depends on a united team. The idea is responsible for only 28% of the startups' success, although Bill Gross was sure of a contrary situation. As for the business model, it increases startups probability of success by 24%. Funding is just a small part of it — only 14%.
Examples of success that illustrate those factors
Here are several examples:
- Airbnb
Besides a good strategy and idea, another factor of success was timing. The e-commerce marketplace was launched during the economic meltdown — although people were afraid of leasing their flats to strangers, they overlooked their fears because they needed money.
- Uber
The same situation. Both the idea and business plan were very effective, but the right timing was overall more important. During the meltdown, many drivers were looking to earn some extra money.
- Citysearch
Here everything is very simple — the project was designed in response to the demand. Web pages were in high demand.
- GoTo.com
It was launched at the right time. The startup was launched when everybody was curious about the methods of attracting web traffic.
The case of failure from Bill Gross’s experience
Bill Gross introduces an unsuccessful example from an experience when timing did not benefit an innovative idea. He mentions Z.com, an online entertainment platform. It was launched in 1999 and, in spite of a brilliant business model, closed in 2003. The company failed because at the moment of launch, broadband was not widely used. People needed to install codecs, and they refused to use this resource.
2 years later YouTube suddenly showed up. At this moment, broadband Internet was available for 50% of internet users, and Adobe Flash solved the codec problem. It’s pretty obvious, who was more successful.
Summing up the analysis, Bill Gross made a conclusion that the execution means a lot. However, the main factor of success is to be at the right place at the right time, and choose the best time for launch. Even if the idea is «hot» and you want to start working with it right away, it is essential to assess if the consumer market is ready for such an innovation or not. Choosing the right moment will increase the likelihood of success.
Header photo: maxxyustas / depositphotos.com
