The key factor in startup success, and what to do about it

Edited excerpt from notes from Why Startups Like Uber, Airbnb, and SpaceX Succeed, While Others Fail, a talk by Bill Gross:

Bill investigated how 5 key factors affected the success of the 125 companies in his portfolio at Idealab and 125 companies outside of his portfolio. The 5 factors were: (i) idea, (ii) team and execution, (iii) business model, (iv) funding and (v) timing.

The no. 1 thing that mattered was timing. Timing accounted for 42 percent of the successes relative to failures.

Take Airbnb as an example. Everybody thinks Airbnb is an incredible business model. It is a good business model. But “the Airbnb model” had been done multiple times before Airbnb became successful.

One of the things that accounted for Airbnb’s huge success is that it came out right when the huge recession hit around the world. People needed extra money badly. People were willing to rent out their rooms or their homes.

So what can you do about it? First, see if the market is really ready for what you have. Second, adjust your burn rate so you can last long enough to be there when the market is ready for your product.

(1) Thank you Guy Cohen for the tip.
(2) The key take away: don’t scale your costs until you’re sure you have product-market fit.
(3) See: Profitability = control of your own destiny and — more extreme — One way for startups to gain time.

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