The Single Biggest Reason Why Start-ups Succeed (and Fail)

According to Idealab founder Bill Gross, there is a secret to success



Let’s face it: reality isn’t kind to start-ups. Considering those who take the plunge to turn an idea into a business invest life savings, incredible amounts of energy, not to mention a pile of hopes and dreams, it’s overwhelmingly disheartening to discover that on average, nine out of ten new businesses fail, according to Forbes.

As the founder of Idealab, an organisation that assists in the creation and operation of new businesses, Bill Gross is a passionate believer in the power of a good idea and the innovation that it invariably brings to the wider world.

Gross views start-up’s as way to “unlock human potential in a way never before possible”, pushing people to “achieve unbelievable things.”

With both an emotional and financial investment in developing businesses, Gross decided do his own research to uncover what really makes or breaks a start-up.

In order to do so, he rated a group of both successful and failure businesses in five key categories in order to see if there was one, single determining factor.

He looked at ‘the idea’ (is it innovative? Unique? Fresh?), ‘the team’ (are members adaptable? Hardworking? Ready to embrace failure?), ‘the business model’ (is there a clear path to success? Do they know who they are as a business?) and ‘the timing’ (Is the idea too early which requires the education of consumers or too late, making for more competitors?). He then rated each company based on their competency across the five categories.

Gross didn’t just investigate Idealab start-up’s either. Along with 100 of the business successes and failures he himself developed, he also looked into 100, non-Idealab companies like AirBnb and Instagram, as well as those that shut up shop before we had the chance to hear of them.

Upon assessing and comparing the companies in the above areas, Gross found that the number one factor contributing to the business’ success was timing.

According to his research, ‘timing’ accounted for 42% of the companies’ success. Second, was execution/team (32%) and idea came in a surprisingly third (28%), with ‘business model’ and ‘funding’ in 4th and 5th respectively.

In short: you may have a great idea but if the market isn’t ready to be receptive, you won’t get anywhere.

He uses the enormous success of AirBnb to demonstrate just how transformative timing can be.

“That company was famously passed on by many smart investors because people thought, ‘no-one’s going to rent out a space in their home to a stranger’. Well of course, people proved that wrong,” he explained. Apart from a great idea and a good business model, it was timing that really helped AirBnb break the ceiling. “That company came out right during the height of the recession, when people really needed extra money. And that maybe helped people overcome their objection to renting out their own home to a stranger.”

Gross outlined his own experience when timing meant certain failure for his company and certain success for another.

The development of a start-up called initially generated a real sense of buzz at Idealab.

“We were so excited about it; we raised enough money, we had a great business model, we even signed incredibly great Hollywood talent to join the company.”

At the time though, the technological landscape wasn’t ready to take on’s idea. Broadband penetration was too low in the late 90s and it was difficult to watch video content online without a number of technical tweaks users would have to make on their own in order to view the videos. In 2003, closed its doors.

Later, when Adobe Flash Player allowed these obstacles to be overcome, YouTube emerged. The rest, of course, is history.

“Execution definitely matters a lot, the idea matters a lot, but timing might matter even more,” Gross concludes from his research. “Really look whether consumers are really ready for what you have to offer them. And to be really, really honest about it and not be in denial about any results you see. Because if you have something you love – you want to push it forward. But you have to be very, very honest about that factor on timing.”

In business, as in life, it seems timing really is everything.