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.
- 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).
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.
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