Did you know that 90% of all startups eventually fail? It’s a sobering statistic.
Even more terrifyingly, 10% of startups fail within the first 12 months. When you’re thinking of launching a business idea, statistics like this can make you reticent to get started!
The good news is that you can take steps to increase the odds of your startup sticking around for a long time. By understanding the risks, ensuring a steady cash flow, and having the ability to meet the needs of your customers, you’re in a great position to succeed.
But what makes a startup successful? At You are launched, we’ve worked with lots of amazing startups and have analyzed the nine key factors that can help startups like yours see success.
Read on to find out more about how to make your startup successful. And remember, if you want to start with a custom MVP app, we’re here to help!
Table of contents
- 1. A strong idea
- 2. An experienced team
- 3. Good product-market fit and a customer-focused mindset
- 4. A viable business monetization model
- 5. Speed to get to market
- 6. A flexible approach to business
- 7. Adequate funding
- 8. Persistence and determination
- 9. Self-care
- In conclusion: what makes a startup successful?
Find out more about the top ten startup mistakes to avoid
1. A strong idea
Every exceptional startup begins with a great idea. Mark Zuckerberg wanted to create an online directory for Harvard University where he was studying. Steve Jobs and Steve Wozniak dreamed of computers that were small enough for people to use at home. Sara Blakely was fed up with her tights cutting into her feet when she was making door-to-door sales.
To maximize the chances of success, your startup idea should address a genuine need or problem in the market. It’s critical to understand who your target market is and carry out market research to ensure you’re on the right track.
It’s also important to remember that your idea doesn’t have to be completely unique as long as it offers high value to customers. For example, Spotify was not the first music streaming platform to launch. However, because the founders listened to users and implemented features they wanted to see, it quickly became successful.
Alternatively, you can find new spaces to sell in. For instance, when Uber changed the taxi industry by allowing customers to request rides from drivers using their mobile phones.
2. An experienced team
14% of startups don’t see success because they don’t have the right team in place. While you might be tempted to go it alone and do all the work yourself, it’s essential to have people you can bounce ideas off and who have skills that perfectly complement yours.
If you’re a solopreneur, working with a co-founder can increase the chances of success and lead to higher valuations. It also means you expand your network and can find brand-new opportunities.
Even if you prefer to lead alone, sharing the workload can help you launch faster, reduce the chances of problems, and means you can focus on what you’re best at.
For example, if you want to create a mobile app but don’t have mobile development skills, you can hire developers to develop the code for you. If you need help formulating and understanding legal contracts, it pays to have a lawyer on retainer. If you’re not sure how to market your product or service when you launch, a digital marketing agency or freelancer can do the work for you.
3. Good product-market fit and a customer-focused mindset
35% of startups fail because there is no market need for them. Ensuring your startup idea has a good product-market fit means your product or service is perfectly positioned to meet the needs of your target audience.
Achieving product-market fit is hard, and it’s likely that you’ll spend a lot of time understanding what your customers want. Get it right though, and you can scale your startup idea with confidence!
How do you know if you have a product-market fit?
A promising sign is that your customers are willing to pay for your product or want to use it even if it’s buggy or has a lot of downtime.
The Sean Ellis test is also a good benchmark: if customers would be upset if they could no longer use your product, you’re in a good place when it comes to product-market fit.
4. A viable business monetization model
It’s important not just to know what product or service you’re going to provide but how it’s going to make you money. This will give you a clear steer as to how you will earn revenue and give your investors an indication as to how your business idea will scale and evolve.
Some of the most popular monetization models include:
- Paying a one-off price
- In-app purchases
- Commission and transaction fees
Your monetization model may change over time. For example, you might initially let people download your app for free to build a fanbase and make it paid for when demand starts to skyrocket.
5. Speed to get to market
When developing a startup, speed is of the essence. Launching before your competitors means more market share, brand recognition, and loyal customers.
Plus, the less time spent on getting your product or service to market, the less time and money you waste if it is not a success.
Richard Branson famously said: ” A good idea for a new business tends not to occur in isolation, and often the window of opportunity is very small. So speed is of the essence.” Several founders, including Brian Chesky (Airbnb), Drew Houston (Dropbox), and Marc Andreessen (Netscape/Andreessen Horowitz), have shared this line of thought.
With an MVP, you create a basic (but still high-quality) version of your product or service, implementing the bare minimum of features to keep your customers happy. You can then quickly launch, using the feedback you receive to further refine your product or service.
The majority of successful startups got their big break by creating an MVP, from Amazon to Zappos!
6. A flexible approach to business
While planning ahead is critical, sometimes we can get caught out by circumstances beyond our control. The industry might change, new competitors might come out of nowhere, or the whole world might come to a standstill… who could have predicted the COVID-19 pandemic?
It’s important to be open to changing your business offer and adapt to changing circumstances.
For example, take Slack. The company behind Slack originally started by launching an online game called Glitch. However, the game was unsuccessful and shut down because it didn’t have enough subscribers. It also relied on using Flash technology, which was then falling out of favor with gamers.
The company could have called it quits right then. However, attention then turned to the bespoke software the company used to communicate internally, and the company pivoted into the instant messaging sector. Slack was launched to the public in 2013, and the rest is history!
7. Adequate funding
Running out of cash is the most significant reason startups fail, with 38% of companies calling it time because they ran out of funds.
Different startups fund themselves in different ways. Some founders bootstrap their business ideas with loans and savings. Some apply for grant funding. Others look for an investor. The key is ensuring you’ve got enough money to execute your plans and get to market.
You might find your funding needs change as your startup evolves. For example, bootstrapping may work in the early stages of your startup, but you might need a little extra financial support as you grow.
It’s essential to have a handle on your finances and clearly understand your revenue and outgoings. What are you spending your money on, and is there anything you’re spending your cash on unnecessarily?
Need to understand the different types of funding and how to get them? We’ve put together these useful guides to help you out.
- A list of angel investors for your startup
- A list of private equity firms for your startup
- A list of venture capitalists for your startup
- Angel investing, private equity, or VC… which works for you?
- How to find investment for your startup
- Startup grants in Canada
- Startup grants in the EU
- Startup grants in the UK
- Startup grants in the US
- The different types of funding rounds
8. Persistence and determination
Being a founder is hard. You have to invest time and money into your startup, and there’s no guarantee that you’ll see success.
However, it’s vital to keep going and see the positives in the work you’re doing.
Take Elon Musk. Life wasn’t always easy for the world’s most prolific entrepreneur. He left South Africa without any possessions, experienced canceled mergers, and lawsuits, and was forced out of business as CEO. However, he carried on and now owns many of the most high-profile brands in the world.
As Jordan Belfort (The Wolf of Wall Street) said: “The only thing standing between you and your goal is the story you keep telling yourself as to why you can’t achieve it.”
And finally… it’s important to look after yourself. 5% of startups fail because the founder burned out or lost passion for the project.
In fact, “founder burnout” is a real and acknowledged condition when startup founders no longer care about the effort they make, feeling everything is for nothing.
Set boundaries, eat healthily, get lots of sleep, and take time for self-care. The more you look after yourself, the better equipped you are to look after your startup.
Identifying your triggers and putting measures in place to overcome them can help too. For example, if making cold sales calls stresses you out, hire a salesperson to do this for you.
In conclusion: what makes a startup successful?
While it may seem like the odds are against you, there are lots of things you can do to ensure your startup idea has the best chance of succeeding. To recap:
- Make sure your startup idea addresses a genuine need or problem
- Have a well-rounded team in place that is as passionate as you are
- Ensure your product or services meet the needs of your key customers
- Understand how you will make a profit from your product or service
- Launch your product or service as quickly as possible and make changes after you launch
- Be open to pivoting your business idea in order to stay relevant
- Have the proper financial support in place
- Stay committed to your business idea and keep moving forward
- Look after yourself and avoid burning out
And finally, don’t lose heart if your startup idea isn’t successful. Bill Gates, Jeff Bezos, and Steve Jobs, as well as many others, all saw their first startups fail before seeing success.
If this happens, take the time to identify what went wrong so you can avoid making the same mistake next time around. Founders of failed startups have a 20% higher chance of seeing their next venture succeed!
Frequently Asked Questions (FAQ)
A successful startup idea should address a genuine need or problem in the market. It doesn’t have to be completely unique but must offer high value to customers.
Building a team with diverse skills and expertise increases the chances of success. Even if you prefer to lead alone, collaborating and sharing the workload can lead to faster launches and new opportunities.
Signs of a good product-market fit include customers willing to pay for your product and continued interest even if it’s not perfect. The Sean Ellis test is a benchmark; if customers would be upset if they could no longer use your product, you’re on the right track.
Monetization models include one-off pricing, in-app purchases, subscriptions, advertising, paywalls, and commission/transaction fees. Choose a model aligned with your business goals, and be open to adapting it over time.
Launching before competitors increases market share, brand recognition, and customer loyalty. Creating a Minimum Viable Product (MVP) allows for a quick market entry, with feedback helping to refine your offering.
Circumstances change, and being open to adapting your business offer ensures relevance. Successful startups, like Slack, often pivot based on evolving situations and market needs.
Understand your financial needs and explore various funding options, such as angel investors, private equity firms, venture capitalists, or grants. Regularly reassess your financial situation as your startup evolves.
Founding a startup is challenging, and success is not guaranteed. Perseverance, as demonstrated by figures like Elon Musk, is crucial to overcoming obstacles and achieving long-term goals.
Founder burnout is a real concern, and 5% of startups fail due to it. Taking care of your physical and mental well-being ensures you remain passionate and focused on your startup.
Learn from failure. Bill Gates, Jeff Bezos, and Steve Jobs faced failures before succeeding. Analyze what went wrong, and founders of failed startups have a 20% higher chance of success in their next venture.
Want to learn more about the different ways you can achieve startup success? Check out the You are launched blog for all the latest insights.