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Bill Gross is a smart guy. Twenty years ago he started Idealab. They have started over 100 companies. They have had some successes and many failures.
Bill Gross loves startups. He believes the best ones can unlock human potential. Bill wanted to pin point what factors or factor accounts the most for a companies success or failure?
He took a quantitative approach to analyze some companies he has worked with, and others that he hadn’t. He reviewed 100 Idealab companies and a 100 non Idealab companies.
Companies like Flooz, YouTube, Uber, Pets.com, Instagram, AirBNB, Kozmo,LinkedIn, Friendster and more.
He looked at a few factors that he deemed important to get to the one factor that accounts for a startups success.
His findings will surprise you:
Funding – 14%
Sometimes companies receive a great deal of funding – maybe this could be the factor for success? That’s not the case. Well funded companies only accounted for a mere 14% success ratio.
Business Model – 24%
It’s always important to know if the company has a clear path to generate revenues. But Bill notes that you can start out without a business model, and create one later. He pointed out that YouTube didn’t have a business model.
Ideas – 28%
Bill loves big ideas. He even named his company Idealab because he loved the “ah-ha” moment of coming up with a great idea. But ideas only accounted for a 28% success ratio among the companies he reviewed.
Team – 32%
In Bill’s experience he knew that the customer is the true reality. During the talk he quotes Mike Tyson who said “everyone has a plan until they get punched in the face.” If a good team can adapt to the true reality of a demanding customer, perhaps the team is the truest indicator of success for a start up? But ‘team’ fell short as well. Accounting for only a 32% success ratio.
Timing – 42%
Accounted for whopping 42% of the difference between success and failure, timing is the winner. Bill noted that many investors passed onAirBNB. Most thinking that it was odd for a person to rent out a room in their home to a stranger.
Aside from a great business model, and a great team, AirBNB had timing on its side. Launched during the recession when people needed extra cash. Wiping out the stigma attached to it.
Uber benefited from launching during the recession as well. Drivers were looking to pick up some extra money to supplement their income.
The ideal matters a lot. But timing matters more.
Ask yourself: Are consumers ready for what you’re offering? You have to be honest with yourself and your partners.
Hopefully this information will give you have a higher success ratio, and help you to bring something great to the world.
Watch Bill’s TED talk:
This article was originally published in my column for INC.com
Hi, my name is Chris Dessi. I’m CEO of Silverback Social. I’m also author of Remarkable You: Build a Personal Brand and Take Charge of Your Career. If you’d like to read the first chapter of Remarkable You for free, just head here.
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