The Ingredients of a Successful Start-Up
Since entering the entrepreneurship ecosystem in London, I have been fortunate enough to meet some incredible founders and hear inspiring stories. What you quickly realise, however, is that every business has a different story and that there is no “one formula for success”. Furthermore, a lot of the reasons why some of these businesses became successful were actually out of the hands of the founders.
There are, however, several ingredients that founders can control, so it makes sense to nail these in order to give yourself the best possible chance of success at being the next unicorn (a company with a billion dollar valuation). Of course, there are exceptions and YMMV (your mileage may vary), but if you have gotten these aspects of your business right then you shouldn’t go too far wrong.
In general […] if you look at the track record of pivots, they don’t become big companies. I myself used to believe ideas didn’t matter that much, but I’m very sure that’s wrong now.
In recent years, it has become increasingly common to say that the idea doesn’t matter; that it only contributes 5-10% towards the success of the business; that you’re supposed to just test, see what sticks, and then go with the flow – after all, if you spent all your time thinking about what would work, you wouldn’t get round to ever executing.
I think this is an important misconception.
Whilst I do agree that, “great execution is probably more important”, that things “evolve in ways that you can’t predict”, and that, “there’s only so much you can figure out without getting your product into the users’ hands”, I disagree with the general message that, “if your idea isn’t quite right, you can always pivot.” At the end of the day, a bad idea is *still* a bad idea and no amount of pivoting is ever going to change that.
Success stories such as Twitter (originally a podcasting company until they pivoted) have made pivoting seem OK but, if you look across the industry, they are the exception rather than the norm. If you look at successful pivots, they almost always are a pivot into something the founders themselves wanted, and not a random, made-up idea. Airbnb happened because Brian Chesky couldn’t afford to pay his rent but had some extra space. To quote Sam Altman of Y Combinator: “In general […] if you look at the track record of pivots, they don’t become big companies. I myself used to believe ideas didn’t matter that much, but I’m very sure that’s wrong now.”
The hardest part about coming up with a great idea, though, is that the best ideas often seem terrible to begin with:
- Facebook – The nth social network, limited only to broke college students and competing against the monopoly and first-mover advantage of MySpace. Terrible
- Airbnb – A way to stay in strangers’ homes. Terrible
- Google – The umpteenth search engine, and without the web portal that competitors such as Yahoo and MSN had. Terrible
These all sounded like bad ideas but turned out to be really good. You just need belief in your vision and the willingness to ignore others’ naysaying (when appropriate).
Sales becomes easier if your users are actively telling other users how great your product is
To start off with, I want to clarify that, when I refer to a product, I mean the entire product (including customer service, branding, etc).
One of the most important tasks for a founder is to make sure that the company builds a kickass product. Until you have a great product, nothing else really matters. When really successful startup founders tell stories of their early days, they almost exclusively talk about spending day-after-day glued to their desks working on their product or chatting to users. If you have a great product, things such as trying to raise money, get press, hire people, etc, get a lot easier. Sales becomes easier if your users are actively telling other users how great your product is. Life is probably that bit less difficult if your product is Twitter when you’re pitching to VCs.
Few companies that go on to be super successful get there without first doing this. In fact, many start-ups fail because they merely have a product that people like – making a product that users don’t truly love is a great way to fail without understanding why.
Build something that a small number of users love. It is going to be a lot easier to grow from something that a small number of people love, to something that a lot of people love, versus something that a lot of people like to a lot of people love. If you don’t get your product right, you can get everything else right, and you’ll probably still fail. So, when you start on your startup, this is the only thing you should really care about until its working.
At least one of you should have strong expertise in your field or be technical
The relationship between co-founders is one of the most important things in the entire company. One of the top causes of start-up collapse is co-founder disagreement and I have seen this first hand – several of my friends have had their start-ups fail this way. So it is essential that you pick the right person to work with – choosing your co-founder is one of the most important decisions you make in the life of your startup and you should treat it as such.
It is important to either know your co-founder really well, or have at least worked directly with them for at least 6 months. Things such as co-founder networking events don’t work in my opinion – you wouldn’t hire someone this way, so why should you find your co-founder this way? Choosing someone that you’re friends with means that, when things inevitably so wrong, you have a past history to bind you guys together.
A good way to meet a co-founder is at university. The next best is to work at an innovative company – places such as Google and Facebook (where Asana grew out of) are as co-founder rich as Stanford (where the founders of the vast majority of tech companies have come from). London is a massive entrepreneurial hub in the UK, with endless numbers of start-ups located in WeWork offices and Regus lounges across the city.
While it’s better to have no co-founder than to have a bad co-founder, it’s still really bad to be a solo founder. Almost all of Y Combinator’s most successful companies have at least two founders, and I’m struggling to name a single successful company off the top of my head which launched with just one founder (maybe Elon Musk with SpaceX, but he had so many connections by then that he could have pulled in help and leadership from virtually any direction).
But what do you look for in a co-founder? You need someone smart, resourceful and resilient. At least one of you should have strong expertise in your field or be technical (e.g., Mark Zuckerberg was the programming guru at Facebook, Sergey and Larry were experts in data mining & search before Google, Travis Kalanick the software engineer who founded Uber, a tech platform). Plus you’ll have a much better story to tell investors if you can say, “I used to be a software engineer at <Awesome Tech Company>, spotted an opportunity and now want to apply my skills to building an online marketplace.” Software people should start software companies, media people should start media companies.
[Disclaimer: I’m the technical co-founder of a tech start-up, but I don’t honestly consider myself technical enough. My background in fluid mechanics & engineering definitely helped me pick up new programming languages and get up to scratch a lot quicker than most, but I often have to pull in a lot of outside help and I’d still get blown to pieces by any half-decent computer scientist]
The truly great founders are the ones who are very clear on what needs to get done now, and how
There are thousands of people with great ideas, but only a select few who are willing to put in the effort to execute them well. Ideas by themselves are not worth anything – execution is what creates value.
The way to have a company that executes well is to execute well yourself. Everything at a startup is modelled after its founders and so whatever you do forms the culture. If you want a hardworking culture, you have to work hard yourself – there is no other way, you just need to be this relentlessly-driven execution machine.
One of the hardest parts about running a start-up is that there are literally hundreds of important tasks competing for your attention each day. It is your job to identify the two or three critical activities and then ignore or delegate the rest. These critical activities will change over time so it’s important that you keep figuring out what these important things are and just do them. Things such as recruiting advisers, attending conferences, etc, are probably not the best use of your time if you have issues to fix that could lead to you haemorrhaging customers. It’s also hard to plan these things – you will spend a lot of your days firefighting other issues that crop up unexpectedly. But the truly great founders are the ones who are very clear on what needs to get done now, and how.
You also have to be really intense. One of the biggest advantages that start-ups have over other companies is their execution speed, so you need to maintain a fast-paced environment. Yet, as the same time, you need to be obsessed with quality – this is why it’s hard. It’s easy to move fast or be obsessed with quality, but the trick is to do both at a startup. You need to have a culture where the company has really high standards for everything everyone does, but you still move quickly.
What About the Factors You Can’t Control?
I would say that the rate of success of a start-up can be equated to the following:
Success ∼ Idea x Product x Team x Execution x Luck
The hard truth is that, without a bit of luck, you won’t succeed. But without a good idea/product/team/execution, you also won’t succeed even if you have a little bit of luck on your side. If you have these four factors nailed, you’ll know that you’ve given yourself the best shot at success when your luck finally does come.