The Silver Bullet For Start-Ups?

Over the years, I have always watched the trajectory of start-up businesses very closely. As you all realize, most new products and most new businesses fail with businesses generally closing up shop within about three years. So, I have done some digging and asked countless people what they thought was the reason that some businesses succeeded while most did not.

The answers centered almost exclusively around five variables:

1) The Leadership or Management Team

2) The Big Idea for the business

3) The Business Model

4) How well financed the business was

5) The Timing of the Launch


Consistently, I have found that most businesses fail due to inadequate financing. Most brands of large companies fail due to poor marketing or tough competition. Finding why businesses succeeded was a great deal harder to smoke out than dissecting failures. When it came to tech, my highly limited sample came in hard on the attribute of timing. For service companies, most said the team of principals and how careful their subsequent hires made all the difference. Surprisingly, few said the basic idea for the business was a major factor. Almost to a person, they said that often a company evolved and the original idea either went away or became transformed in to something else as the business rolled out. Re the Business Model, one observer said “When a company succeeds, the analysts tout the business model. That is certainly part of the mix but I see it as secondary to the team and timing.” Others made similar comments.

What about funding? We have all heard Fred Alger's famous comment that “there is no such thing as an over-funded company.” So true. A few mentioned funding as vital if you had a somewhat rocky start but none saw it as the touchstone for brand success.

So what was the winner? To my surprise, Timing was the clear winner. More than one mentioned the Great Recession of 2008-2009. Their attitude was that no matter how good your product or service was, we were in the worst downturn since 1933 and people were afraid to spend or try something new. Unemployment soared by 250% and if you could keep you head down and also your job, you felt good. Branching out in to something new was not on the agenda during that very troubled period.

I was skeptical and then thought about it a bit. Then, watching TED talks, I found that my contacts had a strong ally. Bill Gross, the start-up maven, not the bond king, gave a brief talk entitled, “The Single Biggest Reason Startups Make It” and he came down heavily on the side of Timing as a major indicator (the You Tube link is  https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_startups_succeed).

Clearly, I do not agree with all that Gross says. In the six and one half minute video, he discusses the 200+ firms that he has helped launch and discusses which attributes worked. Also, he makes a leap of faith and discusses other that he did not have a hands on relationship with personally. He may be implying a mathematical precision that really is not there as how can you really smoke out the contribution of Idea vs. Team vs. Business Model vs. Funding vs. Timing. He does make some cogent arguments, however and it is well worth a brief view. The example of Air BnB struggling at first as people did not want strangers in their homes dissipated in the Great Recession as people needed money very badly was dead on.

If one relies too much on timing, then you are saying that luck may place an outsized role in the success of a venture. Yet between the comments that I received plus the Bill Gross video, I am rethinking this question. Any opinions?

Should you wish to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.