Biz Tips: Four Factors in Startup Success (or failure)

Biz Tips: Four Factors in Startup Success (or failure)

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Four Factors in Startup Success (or failure)

Four things you should understand before joining or investing in a startup

Creating a framework to evaluate and explain the merits of a startup is something I’ve had to do many times. As a technology/startup executive, I find myself in lots of interviews, by lots I mean between 600–900 per year. All interviews are part sales (the candidate interviewing you and your business) and part inquisition (you trying to find out if the candidate is right for your business and team). In the “sales” component, I’ve found this framework of Four Factors in Startup Success to be valuable in pitching my own company. But also in giving candidates, peers and others one framework to use when evaluating any startup. Here are the Four Factors, framed as questions:

Is there strong indication of product-market fit?

Do you have access to capital?

Are you able to reach/access your target customers?

Can you build a team to execute?

Of these four factors, I like to say that if you can de-risk the first three and put as much risk as possible on the 4th (Execution), you have the best chance for success. Or at least you have the most control of your destiny as an operator. Here’s an explanation of the Four Factors in more detail.

Indication of Product-Market Fit

A lot is bundled into Product-Market Fit in the context of success/failure of a startup. I use the concept of Product-Market Fit to mean that there are customers who will give you money for the solution you provide. Your value proposition meets a need in the market and customers will pay you to deliver it. Whether that market is small and just a toehold into a larger market or whether you have a strategy for building a competitive moat or not, finding that initial market fit to build from is critical.

Access to Capital

Whether its based on founder experience and track record or game changing products, the ability to raise capital to fuel and accelerate a business through the good times and tough periods is very important to success, and can be the reason for failure even when everything else is going well.

Ability to Reach/Access Target Customers?

One of the hardest things for new companies and products is how hard it is to reach your target market. The best products and ideas don’t always win. Distribution can be equally important as product in breaking through and scaling. If customers won’t pick up the phone (whether that means an actual phone or responding to whatever your efforts are to attract them), you have big challenges ahead.

Execution

Execution risk is always present. And its where the best operators want the majority of risk in their business to fall. Things like Focus and Prioritization and Experience are important. But execution risk is mitigated by building the right team. And having the intelligence and courage to constantly refine and retool that team to be the right team at the right time for whatever challenges the company is facing.

I hope this was a useful starting point for thinking of how to evaluate key success factors for startups. If you are an operator, investor, leader, analyst — do these themes make sense to you? Please add to the conversation if you have any thoughts.

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