What’s in the secret sauce and what are essentially the top reasons why startups succeed?
Having interviewed over 100 of the most successful entrepreneurs and investors on the DealMakers Podcast, these appear to be the shared ingredients for building billion-dollar companies.
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- Strong co-founding team
- Have great advisors
- Customer love
- Product-market fit
- Make great hires
- Hire great leaders
- Company culture
- They have something unique
- They refuse to quit
Bootstrapping through the early days can have its benefits. Yet, even when repeat entrepreneurs found new companies and can afford it, they often raise outside capital anyway. It brings in more great minds and connected individuals with a vested interest in your success.
Not running out of money is the CEO’s number one job. It’s why most businesses fail. Some can win just by raising big funding rounds.
Ultimately it adds credibility and visibility. It enables you to buy the business, move fast, recruit well, and make investments that will pay off big in the days ahead.
Storytelling is everything in fundraising. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
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2) Strong Founding Team
It all starts with the founding entrepreneurs. Their smarts, grit, passion, and willingness to learn trumps everything else. Even the business idea.
It is based on the founders that the company will be able to raise funding in the early days, or not.
You can be an army of one or a team of six like the Paypal Mafia or Ali Ghodsi and his team at Databricks. With a founding team of 7, they literally built a $2.7B startup.
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- Fundraising Process : get guidance from A to Z.
- Materials : our team creates epic pitch decks and financial models
- Investor Access : connect with the right investors for your business and close them
Or anywhere in between. Just make sure you have that sticktoitiveness to get you through and inspire others to want to come along for the journey.
3) Have Great Advisors
You can’t ever know everything. You can’t try to learn it all before you start. At every step of the way, you’ll have to keep growing as a leader faster than your business. Or your business will outgrow you.
The most successful companies are those who surround themselves with the best advisors they can find. These are fundraising consultants, a solid M&A advisor, board members, and even CEOs.
Surrounding yourself by great people increases by a mile the reasons why startups succeed.
4) Product-Market Fit
Until you find it, your company is just blowing around in the wind and burning money. Once you crack the code, things can take off very fast and organically.
Get out there, talk to customers, test, get feedback and hone it again until you’ve got it.
5) Customer Love
Product fit isn’t enough to make your company an irresistible acquisition or funding target. Nor enough to maintain customer retention and go viral. They need to love it.
If they love you, they will be your ambassadors and marketers and maybe even your investors.
6) Make Great Hires
The most successful business leaders will tell you that your number one task after not running out of money is to recruit and hire talent.
In my recent interview with the founders of $1.67B ServiceTitan, Ara Mahdessian and Vahe Kuzoyan, they said that recruiting should be the dominant item on your schedule. It’s the highest value activity you can invest in.
7) Hire Great Leaders
Don’t just hire team members and employees, hire leaders. You are going to need a lot of them if you plan to grow a big business and achieve startup success.
Ali Ghodsi says his business didn’t turn around and go from $1 million in revenue to $100 million until he brought in 12 executives.
Don’t wait till you need them either. Like money, the time to recruit is well before your need so that you aren’t rushed.
8) Company Culture
Tony Hsieh built Zappos on its culture. More and more CEOs are saying that culture is the number one factor behind some of the reasons why startups succeed. An effective culture can even be a fantastic competitive advantage in the marketplace.
9) Have Something Unique
Your idea may not be that unique at all, but you need something that is. It can be intellectual property, proprietary distribution and marketing channels, or something else.
Just make sure you really research the market and talk to advisors and VCs who are connected to make sure you are really working on something unique and which has a chance to stand out.
10) They Refuse To Quit
As an entrepreneur, you are going to get punched in the face a lot. Almost on a daily basis. You can’t quit. You don’t fail unless you quit. You can’t succeed if you quit.
It’s those who never stop innovating, fighting through the challenges and just keep executing that make it long enough to be a big startup success.
Below is an infographic capturing the factors and percentages behind startup success. The source of the data is from an excellent Ted Talk given by Bill Gross from Idealab. During the presentation, he describes in detail the factors that determine the reasons why startups succeed and how he has seen those play out in hundreds of companies.
CLICK IMAGE TO ENLARGE
In the video below I cover in detail the top reasons why startups succeed.
FULL TRANSCRIPTION OF THE VIDEO:
Hello, everyone. This is Alejandro Cremades, and today we’re going to be talking about the top reasons why startups succeed. After interviewing hundreds of founders on the DealMakers Podcast, where I’ve seen many, many, many of them building billion-dollar companies in literally less than five years, there are certain patterns that I have seen that I would like to share with you today. With that being said, let’s get into it!
The first reason why startups succeed is capital. As a founder and CEO of the business, your biggest responsibility is literally to make sure that there’s always money in the bank. One of the biggest reasons I would say over 65% of the companies that fail is because they run out of money. So, with that being said, you want to always make sure that there’s money in the bank, that you’re raising company, and that you’re able to continue to fuel the growth of the business during every single phase on the lifecycle of the business.
Money is not just about money itself. You need to have active investors. You need to turn it around and think about the money also as networks because essentially, you want people that they give you the money, and they have networks that you can leverage for either perhaps recruiting, for additional investment, for distribution like partnerships.
So, think about money as networks that you can leverage to achieve your milestones faster and in a more effective way. And again, make sure that you’re never running out of it because this is one of the reasons that really gets startups to succeed. The other thing is, depending on your industry, having more money and having more marketing money that you can spend gives you the possibility to have and create more brand awareness and to crush your competitors.
Another reason why startups succeed is, without a doubt, the founding team. Having a strong founding team, when there is what is called Founder Fit, that means that you have people that are complementing each other and people that have the right type of skill sets in order to deliver that solution that is covering that gap that is in the market. As Jim Collins said: At the end of the day, a startup is a bus without a direction, and if you have the right people seated on the right seats of the bus, you’re going to find that direction toward success.
This is not about grabbing people that you get along with and that you have fun having a beer with, or maybe your family member. This is all about having people that complement you – people that have weaknesses where you have the strengths, or where you turn around, and where they have these strengths where you have your weaknesses. There needs to be that complementary relationship so that you can cover all the holes and make things happen.
The next thing is having great advisors. Let’s face it. Surrounding yourself by the right people is critical. Either it’s advisors for the marketing, for internal processes, for recruiting, or raising more money, you need the right people guiding you, helping you, and those are people that have done it before.
In my opinion, the best advisors are those entrepreneurs that have done an exit, that have done the full cycle of building, financing, and exiting their business and that have gone through that journey before and that can help you because, at the end of the day, history repeats. It’s not about reinventing the wheel; it’s about something that they’ve done where they were successful and applying it to your own story. So, those advisors are great, and you can compensate them with equity so that they’re incentivized to help you in building this with you.
The next thing is product/market fit. Product/market fit is critical. What product/market fit means is that you’ve nailed it on what the market wants, and you are not able to keep up with demand. The product of the service is literally flying off the shelves, and you cannot keep up with the shelves.
In this regard, the only way in which you get there is by really understanding what your customer needs and wants. This is only going to be done by testing a lot, by listening a lot, and doing a lot of qualitative analysis and quantitative analysis, where you’re either doing surveys or getting with people on the phone to have conversations. Those companies that are super successful are those that hit it on the product/market fit.
The next thing is making great hires. At the end, it’s all about the team. It’s all about that team that is aligned, that is super excited about really getting that culture right, that vision, and that mission right. This is not about recruiting followers, people that you need to micromanage, people that you need to stay on top of, so they deliver. This is about recruiting leaders, people that can just be there with you, behind the trenches, in the battlefield. Those companies that succeed are the ones that create an amazing environment where all these people that are leaders can come in and thrive and grow in parallel with the growth as well of the company.
Next is the company culture. There has to be an incredible alignment and understanding as to where the company is going. What is that future that you’re creating? Are people excited about that future? Do they have a sense of ownership in that culture and in that future that you’re also painting? Do they see themselves in that future? That’s the alignment that you want. When you get the culture right, magic things happen.
Those companies that really, really end up being super successful, they are super crazy about culture, and they were very careful when they did the hiring of the first 10-15 employees because those are going to be the ones that are going to establish that culture, even though the culture at the beginning is established by the founders, themselves.
Next is they refuse to quit. That persistence, that being constant, and just falling and getting back up no matter what, and reflecting, learning, and continuing to run toward that goal is something that you see left and right on those companies that were super successful because entrepreneurship is not a straight line. You’re always going to have the ups and the downs, and again, whenever you have a down, you get back up, you figure it out, you reflect from what didn’t work, and then you try to make sure that you get it right the next time.
With that being said, I would love to hear on the comment section below other things that you’ve seen that work for startups in their success, or perhaps what’s working for you. Also, Like this video and subscribe to the channel so that you don’t miss out on all the videos that we’re rolling out every week.
Then, check out the fundraising training, which is the program where we help founders from A all the way to Z with everything related to fundraising, live Q&As, templates, agreements, a community of founders helping each other all over the world, and I think that you would find tremendous value in it. Thank you so much for watching.