The single biggest reason why start-ups succeed | Bill Gross

Translator: Luan Morina Reviewer: Helena Bedalli I am very excited to share with you some research that has surprised me about what makes companies successful, what factors really matter for the success of

start

ups. I believe emerging organizations are one of the best ways to make the world a better place. If you take a group of people with the right seed capital and organize them as a

start

up, you can find human potential in a way that was impossible before. You push them to achieve incredible things. But if a startup is great, why do so many fail? This is what I also wanted to know.

I wanted to learn what is most important to your success. And I wanted to be systematic about it, to avoid some of my instincts and misperceptions that I've had from so many companies I've seen over the years. I wanted to know this because I have been starting businesses since I was 12 selling candy at the bus stop in elementary school, high school, making solar energy equipment, in college doing voice actors. And when I graduated from college, I started a software company. And 20 years ago I founded Idealab, and in these 20 years we have started more than 100 companies, with many successes and many failures.

We learned a lot from these failures. Therefore, I tried to find which factors had the greatest influence on the success and failure of the company. That's why I looked at these five. First, the idea. I thought the idea was everything. I called my company Idealab because I loved the “aha!” the moment when the idea first occurs to you. Over time, I started to think that maybe the team, the execution, the fit, mattered more than the idea. I never thought I'd quote boxer Mike Tyson on TED, but he once said, "Everyone has a plan, until they get punched in the face." (Laughs) And I think that applies to business too.

How important is the team's execution, how important is the adaptation to receiving a punch in the face of the client. The client is reality. And I came to the conclusion that the team was probably the most important thing. So I started looking at the business model. Does the company have a clear path to generating revenue from consumers? This made me think about what was perhaps most necessary to be successful. Then I looked at the financing. Sometimes companies receive large amounts of financing. Maybe this is more important? And of course, the time. Is the idea early and the world not ready for it?

Is it early, that is, are you premature and need to learn the world? Alright? Or is it too late and there are already too many competitors? So I tried to carefully analyze these five factors in many companies. I looked at the 100 Idealab companies and the 100 non-Idealab companies to try to find something scientific about this. First, these Idealab companies, the big five (Citysearch, CarsDirect, GoTo, NetZero, Tickets.com) became

bill

ion-dollar successes. And the five companies at the bottom (Z.com, Insider Pages, MyLife, Desktop Factory, Peoplelink) we all had hopes for them, but they didn't make it. I tried to rank the attributes of all of them based on how I felt they were successful in each dimension.

And then for non-Idealab companies, I looked at the big hits, like Airbnb, Instagram, Uber, Youtube, and LinkedIn. And some flops: Webvan, Kozmo, Pets.com Flooz and Friendster. These companies had enormous funds, even business models in some cases, but they did not

succeed

. I tried to see what factors were most important to the success and failure of these companies and the result really surprised me. The first thing was time. Time accounted for 42% of the difference between success and failure. Second place was the team and execution, and the idea, the variability of the idea, the uniqueness of the idea, came in third place.

Now this is not definitive, we cannot say that the idea is not important, but it really surprised me that the idea was not the most important. Sometimes it was more important when he was on time. The last two, business model and financing, made sense to me. It makes sense that the business model is so low because when you start without a business model, you add one later if customers demand what you're creating. And funding, I think, if you don't have enough funding at first but you get attention, especially nowadays, it's very easy to get funding. Now, let's look at some specific cases around these.

Let's make it a success like the Airbnb we've all heard about. Many smart investors overlooked that company because people thought, "No one would rent a house to strangers." Of course, people were wrong. But one of the

reason

s it was successful, in addition to the good business model, the idea and the good execution, is time. The company appeared just at the time of the review, when people needed money and helped them overcome their reluctance to lend the house to a stranger. Same with Uber. Uber appeared, incredible company and business model, great execution. But the timing was perfect for their need to add drivers to the system.

Drivers wanted to make more money; This was very important. One of the early hits, Citysearch, appeared when people were searching for websites. GoTo.com, which we announced under TED in 1998, was when businesses were looking for profitable ways to drive traffic. We thought the idea was good, but perhaps time was even more important. And some of our failures. We founded a company called Z.com, it was an online entertainment company. We were excited: we raised enough money, we had a good business model, and we recruited big Hollywood talent to join the company. However, broadband penetration was low in 1999-2000.

It was difficult to watch online video content, you had to install codecs in the browser and the like, and the company closed in 2003. Just two years later, when the codec problem was solved with Adobe Flash and broadband penetration increased. With a 50% increase in the United States, YouTube arrived at the perfect time. Ideas, but also an incredible moment. In fact, YouTube didn't even have a business model when it started. I wasn't even sure I could pull it off. But I had found time for beauty. So, in summary, execution matters a lot. The idea is very important. But the right moment even more so.

And the best way to determine timing is to see if customers are ready for what we have to offer. And if we're honest about it, let's not deny the results that you see, because if you have something you want, you want to push for it, but you have to be very honest about the time factor. As I mentioned earlier, I believe startups can change the world and make it a better place. I hope some of these can help you have a higher success rate and get something great into the world that otherwise wouldn't happen. Thank you very much, you were a wonderful audience. (Applause)