Failure is common among startups. Here's how to improve your odds of success.
In my last 11 years with Enterprise Ireland, I have seen success and failure across many hundreds of startups. Today, we are in an age where prospective customers' choices (or perceived choices), and the time they have to make those choices are moving in opposite directions.
While there are many variables that contribute to the success of a start-up, these five characteristics are fundamental:
1. A Strong and Compelling Story
Beginning with the product or service, ask some fundamental questions:
- What problem does it solve?
- Would it really matter to your target customers if the product disappeared?
- Am I responding to customer needs or selling the product I have?
- How am I communicating the value proposition?
- Do I have an articulated grand vision or mission statement that is revealing and true?
Asking and answering testing questions positions the entrepreneur or developer to optimally relate to customer problems and brings forward a solution. Adding value through new ideas is a winning formula — pricing is not. To quote Seth Godin, “Cheap is the last refuge of a product developer or marketer who is out of great ideas.”
2. Expert Advisers
Closely linked is having an objective business ecosystem. This often represents itself in the form of a robust board of directors, especially one with experience connected to the company's values as opposed to particular sector, niche or category. Creating a formal board is often beyond the capability or priority of a start-up, but the objective input from knowledgeable advisers is invaluable.
3. The Sweet-Spot Customer
In the end, customers will decide your success or failure. Finding the balance between a sweet-spot niche customer set, and one that is large enough to help you become profitable is a challenge. The temptation is to cast a wide net, develop a product with perceived wide appeal that in the end is a product that solves nobody’s problem.
Many of the large industrialized markets in North America, Europe and Asia also tend to have sectoral geo-centricity. In other words large customer bases in a relatively centralized location. An ability to identify and target accordingly saves time and money, and embeds the business in an ecosystem conscious of each other’s advancements and driven to maintain competitive edge.
4. Funding and Fundraising
Any startup requires cash. Bootstrapping to winning the investment of institutional finance is the typical journey. Diluting the right amount of equity for the right investment at the right time is the difference between the C-suite managing growth versus managing investors’ expectations. Always be fund raising, or variations thereof, is a well-known adage. Building investor interest through networking, building pipeline, market making, resource management, ongoing product development, promotion (especially in the digital age), positive opinion leader review, and more, contribute to a robust IM and put you in a position to take that investment when wanted, not needed.
Finally, when you think of the variables listed above, not to mention those in earlier stages of a start-up such as ideation, product development, IP licensing, commercialization, technology transfer (if relevant), new hires etc., there is no doubt that luck plays its role. Samuel Goldwyn was (I believe) the first to say “the harder I work, the luckier I get.” Perhaps luck can be created through hard work, but startups that get the unexpected break that has not come through sheer force of will and resource drain, maintain those finite resources to devote to the myriad other challenges. Luck is not to be relied on, but should certainly to be embraced.