Basic rules to make a startup successful
November 8th, 2006 by Gerhard Rasocha
The VentureBlog has a great piece extending on a recent presentation by Paul Graham of YCombinator a venture firm specialized in funding early stage startups. Paul talks about key success factors for startup companies and their founders. I want to pick out three points which I consider the most important ones:
- make something people want
- with focus and determination
- and the ability to listen and react
This really captures the essence of a good start. It sounds simple, but lets look at the potential pitfalls in a bit more detail:
1) Make something people want
I guess this one is pretty obvious. Though, many founders and their startups fail already at this basic premise. They often rely on market research rather than talking to potential customers to get real feedback. One good approach is to build something for yourself like MySpace did (good read “MySpace cowboys”). Though, this might bear its own risks, as you may be the only one in need for the solution (as I experienced myself once). Another good approach is, if the founders have in-depth knowledge of a particular industry or problem. Either way, there are no guarantees your offering will take off, so be careful on this.
One more thing: Never forget, you not only need to offer something people want. You need something people are willing to pay for. In other words, you need a business case. Google showed us how to offer services to customers for free and have other stakeholders (in this case advertisers) to pay for them. That’s perfectly fine, but always remember in the end someone has to pay your bills.
2) Focus and determination
When starting a new business its very easy to get distracted. Too many ideas, too many opportunities. Don’t try to do too many things. There is only so much you can do well at any one time. Pick a strategy and then stick to it (at least for as long as you believe its working). The early months, sometimes years are really hard. Highs and lows are changing almost daily. New opportunities are tempting, but be aware of this trap. Once you are starting to run into too many directions, your chances of failure increase. And be prepared for tough times. Getting a company up and running takes a lot of effort, but your persistance will pay off. In my experience, its not so much the “smarts” that counts, its the determination to make the startup a success.
3) Listen and react
To say it with Frank Tyger:
“Learn to listen. Opportunity could be knocking at your door very softly.”
OK, you thought something up that people really need and you follow it through with focus and determination to make it a success. Great, but now don’t get stubborn. Listen and react. Go your way, but keep your eyes and ears open. Adapt your product to market needs, hell, even change the entire business model if required (but in doing so never forget what I said in 2) above). Use the small size to your advantage and react swiftly to business requirements, but always keep “scalability” in mind.
I would say that these factors are also key for the success of any existing business not only startup companies. Following those basic rules does not guaranty success, but combined with excellent execution and a bit of luck, they give you a pretty good starting point.