Bill Gross has helped more than 100 companies get off the ground with his project called Idealab. Some companies were successful while others failed. This didn’t always match the expectations of Bill and his entrepreneurial committee. They wondered why, and so he started a study on which factors played the most important role in this phenomenon, with the main question being: which factors play a role in the success or failure of a company? Bill looked at the following five factors: the idea, the team, revenue or business model, financing and timing.
Before you read on, which ones do you think are the most important? I expect that if I were to ask this question to random people with and without entrepreneurial experience, and ask them to list these five factors in order from most to least important, their response would be something like this:
First of all, the idea, that’s what it’s all about
Next you need money to start it up, so this is where financing comes in
Then you need a good business model, a good system and a detailed business plan
Then you need a good team to carry it out
And, lastly, the right time
Bill Gross analyzed all 100 companies. He made a list of the five most successful companies and the five ideas that flopped big time. In addition, he analyzed 5 super successful companies outside of Idealab: Airbnb, Instagram, Uber, YouTube and Linkedin. And five external companies that everyone had high hopes for, but failed anyway. Then, all those companies received a grade from 1 to 10 in the previously mentioned factors. The actual order will surprise you! I will explain these from least to most important.
4 and 5: Business model and Financing
It is not without reason that the business model and financing came out as the least important factors. This, however, does not mean that they are not important, but that they play a very small role in whether a startup succeeds or not. A business model and revenue model are indeed important, but these are things that will come later. Don’t worry about not being able to do this, you will learn this along the way and soon you will be able to hire someone whose talent/background is to do this.
Many people with an educational background in business, policy or economics may now become very angry and react defiantly. They have learned that a business plan is the very foundation of a company. Remember that the business schooling systems are not training you to become an entrepreneur, but to work for one. If you want to learn entrepreneurship, the best way to do that is to learn from the best entrepreneurs. In entrepreneurial training, the business plan is rarely paid attention to. Even in the $10,000 training from Tony Robbins (Business Mastery Course) and the exclusive private training of Darren Hardy, the business model gets very little attention. Or at least… not as much as you’d think.
Money is therefore not the problem and certainly not a guarantee of success, yet people often use it as an excuse not to start. As Darren Hardy, success coach and best-selling author, said, “Don’t let what is least important get in the way of what is most important.”
3: The idea
On number three we have the idea. This was a very interesting finding as one would expect this to be the most important factor! Here people often fail because they head towards one of the two extremes: the idea is overly centered in the present or overly futuristic.
When you want to start a business in a field where you already have immense market competition, such as clothing or hair products, you are at risk. However, it is okay to reuse or recycle existing ideas. When Steve Jobs initially designed the colorful iMac, the technology of plastic back then wasn’t developed enough to bend colored and transparent plastic in a way to build a computer. Steve Jobs visited a candy store to learn from the process of creating sugary artworks. As a result, he eventually succeeded in developing the candy-colored iMacs that created the distinctive look of the Apple product. So he brought together two things that already existed: confectionery and computers.
From this we gather that you don’t have to be the first person with the idea or, as the saying goes: you don’t have to reinvent the wheel! In fact, if no one has done it before, you run a higher risk of your startup failing. Statistically, those who have a new idea but aren’t the very first are more likely to succeed. This has been the case with YouTube, for example, as YouTube was already the second or third attempt of such a platform. But I’ll get to that later!
Think carefully about your idea. What makes your product or idea different from the rest of the market? What makes it better? Which experience can you add to it? Don’t shy away from taking inspiration from other markets like Steve Jobs did with sweets!
2: The team
One great piece of advice I once got from a personal coach was: “If you go too fast, no one will be able to walk along with you.” It hit me like a bolt of thunder because I know how important the team is! This was also one of the findings in Mr. Gross’s study, as the second most important success factor turned out to be the team. That’s why I wrote this great quote from Darren Hardy on the whiteboard at the office, where you see it as soon as you enter our office: “Whoever fields the best team wins.”
Mark Zuckerberg also calls this the secret to his success: he hires people who are better than him at what they do! If you are the best at your role (that would probably be leadership as an entrepreneur), you just need to find people who are the best in their field and put them in the right place.
Most business owners think they should be able to do anything, or understand everything. That is not true. I am so bad at administrative matters that I even make mistakes when I have to fill out basic forms. This leads to funny events such as the pizza place calling me (a little annoyed) that I filled in my surname a second time where I was supposed to enter my street name. Whenever I have to fill in government forms, I already warn the personnel that I will need some extra forms to do it over. Imagine me doing business administration! Again, this only highlights why running a business takes so much diversity in character, you NEED people. That is why you must learn to be good to them, communicate well and be honest. Share your success with your team because you can’t do without them! This is your most important investment, don’t be stingy when it comes to your staff.
Timing: the winning factor
Yes! The title said it all. This is what we came for. I don’t like click-bait stuff, I prefer to be transparent and open, hence the spoiler in the title 🙂
Surprisingly, the factor that constantly surfaced as the deal breaker was timing. Airbnb did not receive funding from investors, no one believed in the idea. Yet the company has become hugely successful and went international in no time. The investors declined with arguments such as: “Nobody is going to let strangers sleep in their house, right?” However, people thought differently during the recession. Airbnb bloomed at a time when many people simply needed extra money. Also, hotels became too expensive. The same goes for Uber, a crisis arose in the taxi industry. Last time I drove with an Uber, the driver told me that he has been working as a taxi driver for 20 years. On one hand Uber is his competitor but at the same time Uber has also saved him from unemployment.
Another example I promised to get back to: YouTube! The idea already existed, but it was just too early for it to really stick. Computers weren’t as advanced as they are now, they weren’t that simple (remember that sometimes simplicity is an advancement!). So, if people wanted to watch videos, they had to manually enter long, complicated codes. Needless to say, those companies failed. And then, just after the technology arose that allowed people to watch movies with a simple click, there was YouTube!
Therefore, there are two main risk factors: the predecessor and the latecomer. Let’s start with the latecomer as this one is the most common. It goes without saying that it is not so smart to open a bakery on the street where you already have 600 in a row. At least, you would think so. Because apparently this is not how most people think. They are more likely to think: “Ah, if these 600 bakeries in the bread street have managed to make ends meet, then I should also succeed when I get there as no.601. Yeah, maybe you can make ends meet, with difficulty. But you will not really thrive unless you really come up with something innovative. There is hope, however (there always is)!
Think carefully about what distinguishes you from all the others who are doing the same and emphasize that difference in your marketing. Read again what I advised you to do under ‘’The idea’’. Think about what makes you (or your product) special.
We now move on to a small group of people who live way in the future. I also fall under this risk category, that’s why I went to see a personal coach who specializes in these kinds of people, as she calls them: ‘the Ferrari’s of society’. When you come up with something super innovative, chances are people don’t understand it yet. The painful thing about that is that 10 years later, if you have already given up on your idea and forgot about it, someone else may shoot into the air with that idea. Therefore, think carefully and ask yourself whether the world is ready for your idea. Working in health care myself, we work with a request that is actually barely emerging. That means we have to sit it out and continue to exist, so that by the time it really starts being a hot demand, we will be there for them already.
When Napoleon Hill told his mentor – around 1920 – that he would like to be the first to write about individual success, his mentor replied that in about a hundred years there would be a very great social need for Napoleon’s subject. In 2015, his book “Think and Grow Rich” sold more than 20 million copies! We are not fortune tellers, however, if you observe and pay attention to patterns you can see ahead. If you go too fast, you lose your team and your idea won’t agree with society.
So the single most important factor in success is timing. Now the question remains, how do we choose the right time? Well, knowledge is power! Read more about how to find and anticipate the right timing here.