Bill Gross, the founder of Idealab did a study. Idealab has started over a hundred companies. Many of them have been billion-dollar successes and others have failed miserably. He wanted to find out what was the single biggest reason why startups succeed. Why do some startups succeed and others don’t?
He selected five factors:
- Idea of the business
- Team / Execution
- Business Model
He studied the one hundred Idealab companies and another 100 non-idea lab companies, a total of 200 companies. He studied big winners and big losers from each group. Some of the companies studied included Youtube, LinkedIn, Airbnb, Uber, Instagram.
The results? He found that timing came up on top. The idea came in at third place.
- Timing (48%)
- Team / Execution (32%)
- Idea (28%)
- Business model (24%)
- Funding (14%)
One might have thought that a great idea would come first or the team. But while these two are still very important, starting the company at the right time, when the environment was right, when the weather was just right for the company to come onto the scene was the single most important reason that start-ups succeed. If a company starts earlier than it’s time, it might not succeed at all. Many times, a certain event has to happen to make the environment just ripe for that company. If the company starts too late, others might have taken over a big share of the market. Opportunity comes in waves. A good entrepreneur has to be ready, prepared to take advantage when the wave of opportunity comes for the company to surf. The entrepreneur must discern when the wave of opportunity has appeared and then jump on it.
In 1998, strategy expert, Richard Rumelt, had the chance to ask the late Apple founder Steve Jobs a question. This was after Jobs had just returned to Apple and successfully turned Apple around. On the heels of that major success, Rumelt asked Jobs, “What’s the long-term strategy?”. Jobs just smiled and said, “I am going to wait for the next big thing.” Jobs was willing to wait until the next opportunity came up for him to take advantage of. For him, that was Pixar and then, in an even bigger way, the iPod, and then the iPhone. Like a lion, he was willing to prepare himself and wait just for the right moment that a prey will come around. He will be fully ready to for that predatory leap. He was ready with his surfboard and gear, waiting for the next wave to form and then he will get on it and surf it. Great surfers know when to get on it and when to come off it.
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It’s been said that success happens when opportunity meets preparation. The truth is that preparation must always be ready and watch and wait carefully day and night for the opportunity to arrive at which time preparation is ready to take advantage of it.
There is an idea, and then, there is an idea whose time has come.
Farmers who depend on the weather for a good yield of crops know a thing or two about timing as well. They wait for the first rains to come and announce the beginning of the rainy season before they till and plant their crops. If they plant in the wrong season, they don’t get a crop.
The point is, timing is crucial. According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. That’s 80% failing in less than two years. If you increase the time to say 5 years, the statistics are even more dismal. Yet, as entrepreneurs, we must start businesses and other ventures. Knowing that timing is crucial will hopefully help us do better.