Why do so many startups fail and what is the biggest key to success?

I remember this slide that Serdar showed us in the first lesson of the course, and I wasn’t surprised when I saw it.

I had heard of the startup failure rate before and I can only imagine how much work and effort it takes to create a successful company. But why do so many startups fail? 

I wanted to know why so my curiosity led me to an interesting TED-talk clip with Bill Gross. Gross has founded and incubated a lot of startups at Idealab and was searching for the answer to that question too and made a research. He gathered data from hundreds of different companies to investigate why some succeed and others fail. Gross ranked each company on five key factors and found that one factor stands out from others. So what factors counted the most?

The idea?

The team?

The business model?

The funding?

The timing?

Surprisingly, it was not the business idea of the startup that was the key factor, which I thought. It was actually the timing that was the number one key to success. This shows how important it is that the market and society is ready for your business idea. Gross mentioned for example that Airbnb was so successful because it was launched at the right time and their idea could thrive in the recession. In the hard times of recession,  people were more willing to rent out their home for strangers and the whole thing became more common. Before that people thought that the whole idea was weird. “Who would want to rent out their house to a stranger that they found online for a short period? Who would want to live in some random person house? ”

Gross also mentioned how YouTube became successful because it was perfectly timed with the launching of Adobe Flash, and this shows the importance of timing it with existing complementary products.

So the lesson learned is that to increase your chances of succeeding you have to be in the market with your idea in the perfect time when there are a potential demand, mature market, and existing technical complementary products.