What makes a start-up successful?
The prospect of building your own start-up is an understandably attractive one — you get to follow your passion, choose your team and achieve the independence of being your own boss. Yet, while entrepreneurs regularly come up with great business ideas, there is a long and perilous road from developing an idea to turning it into a successful business.
In fact, a study from Harvard Business School estimates that about 70 percent of all start-ups fail within ten years, with half failing within five years and 20 percent not even making it to the one year mark. While start-ups can flourish in virtually any sector or industry, there are some common traits that allow new businesses to navigate the risky days of their early growth. With such a slim margin of success, identifying these key characteristics that enable start-ups to succeed is an all important question, for both entrepreneurs and investors.
One aspect that is crucial for successfully developing a business is extensive and detailed market knowledge. While founders usually have a great deal of expertise about their product or service and its various applications, expert knowledge of the market in which their business will operate and the various competitors they face is equally important.
This is especially relevant from the point of view of investors. “While some entrepreneurs occasionally switch industries and find success, venture capitalists are more inclined to fund a founder or team who has worked in a specific industry for years,” states Promod Haque, a senior partner at Norwest Venture Partners. Entrepreneurs with greater industry experience tend to be more perceptive to consumer needs, market opportunity and the extent of competition, making them more credible to investors.
Secondly, no matter how brilliant the idea driving the start-up, it is only as good as the people behind it. A mutual passion and a unifying vision needs to be shared by the founder and their team in order to stay driven and focused. The importance of vision is also highlighted by Juan Jose de la Torre, IBM’s digital transformation leader for the Middle East and Africa, who states “Vision is the vital energy that drives the entrepreneur, the founder, the co-founder, and his immediate team. Vision is what makes them dare: dare to explore, dare to challenge, dare to insist, dare to keep pushing, dare to have the determination to succeed.”
Finally, in order to secure funding and investment, a critical step in business development, start-ups need to be able to provide data that showcases their potential. When presenting their ideas to prospective investors, entrepreneurs need to have the data metrics that prove the market and consumers are eager to engage with their company. Through detailed analysis of the market need for their offering, the appropriate price point to set for it, and how long consumers would need the product or service for, founders are far more likely to receive a positive response from investors. In this capacity, mentorship or previous start-up experience are particularly valuable, as the insights that can be gained from these are very beneficial for both predicting demand and market trends.
While having an innovative business idea is undoubtedly at the core of a successful start-up, and there is no one-size-fits-all blueprint for mapping out the early stages of business development, the qualities above will provide a solid foundation for future growth.