Everybody loves a good startup success story. 

The allure of the startup is understandable. We hear about social media giants like LinkedIn and Facebook and their ascension from their founders’ living rooms or college dorms is legendary.

But what makes startups so special and what does it even mean for them to be successful? How many of them actually make it? How many have to close down? What are the main ingredients of successful startup stories?

We have dived deep into these questions and resurfaced with the answers.

Definition and Success Rate for Startups

Why Are Startups so Popular?

Startups have two exciting qualities that make them somewhat mythical creatures:

• Innovation – They usually develop a single revolutionary product that responds to a unique customer need.
• Growth – As opposed to small businesses’ gradual process of growth, theirs is exponential and can be quite spectacular.

The Definition of Startup Success

Normally, when we say “successful startup”, companies like Uber or Pinterest spring to mind. But monetary value and profit are not the only criteria for success.

Startup founders go into business for the following reasons:

• Inflicting change – Many business owners want to make the world a better place by responding to a particular need in a certain way.
• Provide value – Some startup founders measure their success in terms of feedback from clients regarding their products.
• Make profit – Generating profit is the obvious reason here, although it’s not the only motivation when starting a business, it’s definitely the main one.

Unicorns

The rock stars of startups are unicorns, companies whose market value exceeds one billion dollars. As of January 2020, there were over 600 unicorns worldwide.

The possibility of making it big and becoming a tech unicorn is understandably a great incentive for those looking to launch a startup.

Startup Success Rates

Unfortunately, not all startups make it big and some of them don’t make it at all. In fact, only 1 in 12 startups goes on to become a successful business, according to the Startup Genome Report.

Nevertheless, the ones that do succeed have the potential for greatness. Think of it as an all-or-nothing business experiment.

The Successful Startup Team

Skilled people are an essential ingredient in any business and this is particularly true for startups, as they are fairly small ventures that need extraordinary individuals to push forward.

When it comes to the ideal startup team, several aspects need to be considered:

Number of Founders

Even though some research suggests a single founder is better, the consensus is that the ideal number of founders is two to three for a startup business.

The decision-making process would be unnecessarily encumbered by more than three partners involved in it, while only one founder would have difficulty handling different aspects of the business on their own. No availability for sanity checks.

Previous Experience

Prior experience working for a startup is highly desirable for team members, as that will enable them to avoid beginner mistakes.

Experience in the field is a must, as long as it does not hinder one’s ability to think outside the box.

The level of education depends on each startup’s needs, but a degree in the targeted field is desirable.

Funding and Startup Success

Funding is a big part of achieving startup success. It is not, however, the biggest reason for failure.

Research into why startups fail places the failure rate (because of cash inflow problems) between 16% and 29%.

Startup funding issues, however, are often a symptom of and appear in conjunction with larger problems, such as poor marketing strategies, unscalable business models, lack of research on funding programs for startups or simply bad timing management.

The best way to prevent any financial issues affecting your startup company’s well-being is through thorough, realistic business planning from the beginning. Seed funding for startups attracts capital by building robust investment material, accounting for the unpredictable so that your business is strong enough to take off when it comes. And by understanding SBA interest rates, you have a better chance of securing financing for your business. 

Content Marketing for Startups

Content marketing is essential to any business nowadays, but to startups eager to make it in the business world it is vital.

You might not have the financial means to support big advertising campaigns in the beginning, but you still need to build brand identity and raise awareness about your business.

Relatively affordable in comparison to traditional marketing methods, content marketing will give your startup a boost and help your business grow.

Once you figure out who your target audience is and what it wants, you can start producing SEO-optimized content that will drive traffic to your website and provide you with new prospective customers.

Startup Scaling Challenges

Knowing how and when to scale your business is of vital importance in the startup world. The Startup Genome Report identifies premature scaling as the primary cause of startup failure.

What does premature scaling mean?

First, we must understand the two different types of dimensions of a startup company:

The Inner Dimensions, consisting of:

• Product
• Customer Relationship
• Finance
• Legal
• Team

The Outer Dimensions or Traction, represented by:

• UserBase
• Customer Base
• Product Usage
• Revenue

It is essential for startup businesses to maintain a healthy balance between their Inner and Outer Dimensions. When they fail to do so, the whole business goes under.

Premature scaling is a phenomenon that occurs when the Inner Dimensions of a company get ahead of its Outer Dimensions. Prematurely scaled companies are classified as inconsistent.

If you’re not sure whether you’re on the path to premature scaling or not, look for the below signs, as identified in the same Startup Genome Report:

• Developing unnecessary features
• Insufficient user testing
• Excessive focus on scalability

To avoid this pitfall, make sure to always check for discrepancies between the two dimensions and take quick remediating measures when any are found.

The Role of Timing in Startup Success

Like with every other aspect of life, timing plays a crucial role in startup success. In fact, Bill Gross, the CEO of Idealab, identifies timing as the single most important reason for startup failure in one of his Ted Talks.

According to him, 42% of failed startups owe their fate to poor timing. He offers the example of Z.com, which offered video content online before broadband became widespread and went out of business in 2003, just two years before Youtube became wildly successful with the same idea.

So before you rush to present the world with your wonderful product, make sure you are not:

• Too early – The technology or appetite for it doesn’t exist yet
• Too late – Too many competitors are offering similar products

Once you’re sure this is the right time, you can set sail and go full speed ahead. Except there is one more thing.

Successfully Identifying a Market Need

As a startup, your ability to identify and respond to a market need is of utmost importance. It can make you into a success story or set you up for failure.

Having a great product is not enough if it doesn’t respond to any existing need or solve any problem that a considerable number of your customers have.

That is why market research is as important as product development. It is also why several studies – run by CB Insights and Startup Genome – identify the non-existence of a market need as the biggest cause for startup failures.

If you really believe in your product and think it’s the product people “deserve, but not the one they need right now”, it might be a timing issue. In that case, you can do one of two things: play the waiting game or set out to educate your customer base.

Conclusion

Launching a startup is a risky business, but the outcome can certainly be worthwhile. As long as you have a great product (or idea for a product) and have done your market research, you can start putting together a business plan and identifying your funding needs.

You will need partners in crime, not too many, just enough to shoulder the weight. Once you have launched your startup, make sure you have a solid content marketing strategy and pay attention to the delicate balance between all dimensions of your business.

As long as you account for these factors, your startup is on the right track and who knows? It might become the next great success story.