The single biggest reason why start-ups succeed | Bill Gross

The single biggest reason why start-ups succeed | Bill Gross


I’m really excited to share with you some findings that really surprise me about what makes companies
succeed the most, what factors actually matter the most
for startup success. I believe that the startup organization is one of the greatest forms
to make the world a better place. If you take a group of people
with the right equity incentives and organize them in a startup, you can unlock human potential
in a way never before possible. You get them to achieve
unbelievable things. But if the startup
organization is so great, why do so many fail? That’s what I wanted to find out. I wanted to find out what
actually matters most for startup success. And I wanted to try
to be systematic about it, avoid some of my instincts
and maybe misperceptions I have from so many companies
I’ve seen over the years. I wanted to know this because I’ve been starting businesses
since I was 12 years old when I sold candy at the bus stop
in junior high school, to high school, when I made
solar energy devices, to college, when I made loudspeakers. And when I graduated from college,
I started software companies. And 20 years ago,
I started Idealab, and in the last 20 years,
we started more than 100 companies, many successes, and many big failures. We learned a lot from those failures. So I tried to look across what factors accounted the most for company
success and failure. So I looked at these five. First, the idea. I used to think that
the idea was everything. I named my company Idealab
for how much I worship the “aha!” moment when you first
come up with the idea. But then over time, I came to think that maybe the team,
the execution, adaptability, that mattered even more than the idea. I never thought I’d be quoting
boxer Mike Tyson on the TED stage, but he once said, “Everybody has a plan, until they get
punched in the face.” (Laughter) And I think that’s so true
about business as well. So much about a team’s execution is its ability to adapt to getting punched
in the face by the customer. The customer is the true reality. And that’s why I came to think that the team maybe
was the most important thing. Then I started looking
at the business model. Does the company have a very clear path
generating customer revenues? That started rising to the top
in my thinking about maybe what mattered
most for success. Then I looked at the funding. Sometimes companies received
intense amounts of funding. Maybe that’s the most important thing? And then of course,
the timing. Is the idea way too early and
the world’s not ready for it? Is it early, as in, you’re in advance
and you have to educate the world? Is it just right? Or is it too late, and there’s
already too many competitors? So I tried to look very carefully
at these five factors across many companies. And I looked across all 100
Idealab companies, and 100 non-Idealab companies to try and come up with
something scientific about it. So first, on these Idealab companies, the top five companies — Citysearch, CarsDirect, GoTo,
NetZero, Tickets.com — those all became billion-dollar successes. And the five companies on the bottom — Z.com, Insider Pages, MyLife,
Desktop Factory, Peoplelink — we all had high hopes for,
but didn’t succeed. So I tried to rank across all
of those attributes how I felt those companies scored
on each of those dimensions. And then for non-Idealab companies,
I looked at wild successes, like Airbnb and Instagram and Uber
and Youtube and LinkedIn. And some failures: Webvan, Kozmo, Pets.com Flooz and Friendster. The bottom companies had intense funding, they even had business models
in some cases, but they didn’t succeed. I tried to look at what factors
actually accounted the most for success and failure across
all of these companies, and the results really surprised me. The number one thing was timing. Timing accounted for 42 percent of the difference
between success and failure. Team and execution came in second, and the idea, the differentiability of the idea,
the uniqueness of the idea, that actually came in third. Now, this isn’t absolutely definitive, it’s not to say that
the idea isn’t important, but it very much surprised me that
the idea wasn’t the most important thing. Sometimes it mattered more when
it was actually timed. The last two, business model and funding,
made sense to me actually. I think business model
makes sense to be that low because you can start out
without a business model and add one later if your customers
are demanding what you’re creating. And funding, I think as well, if you’re underfunded at first
but you’re gaining traction, especially in today’s age, it’s very, very easy to get
intense funding. So now let me give you some specific
examples about each of these. So take a wild success like Airbnb
that everybody knows about. Well, that company was famously
passed on by many smart investors because people thought, “No one’s going to rent out a space
in their home to a stranger.” Of course, people proved that wrong. But one of the reasons it succeeded, aside from a good business model,
a good idea, great execution, is the timing. That company came out
right during the height of the recession when people really needed extra money, and that maybe helped people overcome their objection to renting out
their own home to a stranger. Same thing with Uber. Uber came out, incredible company,
incredible business model, great execution, too. But the timing was so perfect for their need to get drivers
into the system. Drivers were looking for extra money;
it was very, very important. Some of our early successes, Citysearch,
came out when people needed web pages. GoTo.com, which we announced
actually at TED in 1998, was when companies were looking for
cost-effective ways to get traffic. We thought the idea was so great, but actually, the timing was probably
maybe more important. And then some of our failures. We started a company called Z.com,
it was an online entertainment company. We were so excited about it — we raised enough money,
we had a great business model, we even signed incredibly great
Hollywood talent to join the company. But broadband penetration
was too low in 1999-2000. It was too hard to watch
video content online, you had to put codecs in your browser
and do all this stuff, and the company eventually
went out of business in 2003. Just two years later, when the codec problem
was solved by Adobe Flash and when broadband penetration
crossed 50 percent in America, YouTube was perfectly timed. Great idea, but unbelievable timing. In fact, YouTube didn’t even have
a business model when it first started. It wasn’t even certain that
that would work out. But that was beautifully,
beautifully timed. So what I would say, in summary, is execution definitely matters a lot. The idea matters a lot. But timing might matter even more. And the best way to really assess timing is to really look at whether
consumers are really ready for what you have to offer them. And to be really, really honest about it, not be in denial about
any results that you see, because if you have something you love,
you want to push it forward, but you have to be very, very honest
about that factor on timing. As I said earlier, I think startups can change the world
and make the world a better place. I hope some of these insights can maybe help you
have a slightly higher success ratio, and thus make something great
come to the world that wouldn’t have happened otherwise. Thank you very much,
you’ve been a great audience. (Applause)

100 comments

  1. Airbnb and Uber are great for making money. Not such a great business when you look at the effects on community, people, everything else that matters…

  2. I am currently 15 years old working on a startup that hopefully goes well – Daniel Urmanov Wessling 2019

  3. I don’t know if timing is the right word. Research your customers properly and make sure your product / service is really what customers want.

  4. I opened my LLC start-up in the United States using delawarefile.com. I would recommend to anyone who wishes to enter the US market.

  5. What many of you fail to realize is that if you don't have money to start a startup then your fucked. Most startups these days average $20k just to start, or all of your time. Either is going to give, and usually, it requires all of your time and money.

  6. I run a business, it involves creating business plans for people to include market research and financial forecasting. If anyone needs one done Id be happy to help

  7. Probably the most wholesome and thought-provoking content I have come across all week. Thoroughly enjoyed this video.

  8. Rich people have rose colored lens, he is looking at it from his class. Yes in his class funding and business model don’t count. For the rest of us normal folks it is a different game. In reality this is how it works:
    1. Connections (family, social class, race included) – as George Carlin says “it’s a big club but you’re not in it”. You or me will not be able to create an Uber or Airbnb as the regulations of taxi and hotel services will apply to us but for the exceptional class with government connections that is a different story.
    2. Funding – without number 1, not getting to number 2
    3. Founder / VC / advisor – are there psychopaths in this group? What is the real motivation to building the product? What is everyone’s motivation to be part of this startup?
    4. Team – need number 2 to build it, no employee will work for free
    5. Market fit – is there a market for the idea?
    6. Product – is the product easy to use or does it even work or exist?
    7. Environment / market conditions (timing) – technically if you have a lot of 2 then you can possibly wait it out to hit this. Sometimes you may target a particular country or society that has the elements you are looking for.

  9. so amazing. I watched this talk several years ago, and learned so much. I just watched it again, and learned even more . Thank you Bill Gross 🙂

  10. All the companies he mentioned are basically software companies. So if you know how to code you can start these companies with just a laptop. You don’t need to invest in any inventory. You can test it out without having spent a lot of money and see if it gets traction.

  11. I partially agree with him. What matters is finding the needs of users first and creating a solution which targets it head on. Unless we build something that is actually needed no one is going to buy it

  12. Well executed TED talk, but way too superficial to take away any useful (and new) insight. A quick look at the study's findings would be interesting but unfortunately there is no link provided here.

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  14. Any academic can rip this talk apart.
    For one Saying timing is more important is almost the same as saying 'chance' is.
    His analysis is retrospective too, and hindsight suffers from bias
    And so on
    Thanks

  15. Timing, right timing is the core of success. A good idea at a wrong time will fail, a bad idea at the right time even without funding, team and business model shall succeed.

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  17. I've been helping clients to grow their network and get in front of the right people, we work with B2B companies and I want to help startups use the power of LinkedIn and a well thought-out strategy to understand and hit their target market, do you guys think this may help some folks?

  18. In order to get the “scientific” results (2:45), the speaker rated the companies in each of the five areas based on how he “felt” they scored (3:07). There was nothing scientific about this.

  19. Excellent!

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  20. Well…Persistence, Timing and Money is the 3 main reasons for a startup to succeed. Being a CEO for a new startup taught me that, it's pretty obvious but it is the truth.

    Also "Needs over Quality" is the best weapon for a Startup.

  21. there's no accurate way to rate timing, it's a self-fulfilling metric, successful companies are retroactively considered to have had good timing, failures bad timing… the only way to judge would be to have a company that failed at first, but then another near-exact same company succeeded later… keeping in mind for example that while twitter and facebook are both social media companies, they are hardly alike in execution or real idea

  22. Even though the concepts are nothing new (supply and demand), and his weighting system was subjective, he had the power of history on his side so his assessments are not necessarily "biased." Timing is definitely an important factor, along with other things like persistence and resources (not just funding resources but also being connected to the right people).

  23. For me, this is just a painting by numbers show, that aims to please the audience, with something simple gimmicks, but might not really be relevant, when such numbers are just a personal best guess beyond any facts.
    I really feel sorry for every hard working startup that fails this dragnet investigation, and I really do not understand that still 14% of startups having everything right still are still failing because of failed funding…
    Investors that are doing nothing else, than keeping thumbs up or down, are old school overhead, and we need better, more intelligent people, that help with all other things than just money.
    With so much money waiting on the sideline, money is no longer important. We no longer need moneypeople investors, but experienced entrepreneurs and de bono networkers who are able to bring in and might help on whatever the startup is missing to become successful.
    Finger Pointing and dropping a startup – means killing jobs, ambitions and dreams for missed skills was yesterday.
    Fixing those flaws and bring it up to provide long term, sustainable and interesting jobs, projects , learning experience and research is the new more intelligent groove that benefits not just some clowns on stage but all of us.

  24. These are good insights. The timing part is of particular importance. Of course, from Bill Cross's point of view, success means:
    – IPO
    – Profitable sale to a large company
    – Privately held company with decent profit margins
    This is standard VC thinking. I am not saying that is wrong. There are actually a lot enlightening parts, especially about timing. Microsoft tried the tablet first and failed because the technology was not there yet. Apple succeeded because together with the hardware manufacturers brought the technology to the acceptable level. The iPad was thin enough, fast enough, and its screen resolution was great for people to buy. Apple of course added the design, which they are famous for, to make it a winner.

    By contrast, Steve Job's criteria for success:
    – People just LOVE the product
    – The product is 5 to 8 years in front of anything else currently on the market
    – Idea is something the customer has never even thought was possible
    And specifically on the last one, Job's famously said that when you create a product you cannot just rely on what prospective or current customers think because they are not experts and don't know what's really possible. With this type of thinking IDEA and TEAM are probably at the top. Is Apple a successful company, and especially during Steve Job's time at the helm. You bet it is. It is the most expensive company in the world in terms of market cap.

    So the truth is somewhere in the middle, I guess. And sometimes it is not that easy to differentiate between an idea as a general direction or a product idea, and ideas that directly affect how the product is built. For example, the idea about the electric car is not new, but the ideas behind Tesla's take on the electric car are quite unique.

    My personal take is that ideas and timing should be on par, that is of course, if we want to combine the Bill Cross's and Steve Job's approaches into one. I kind of like this idea 🙂

  25. Hey everyone. Currently working on an inspiration/guidance talk YouTube to help other individuals around the world get the help they may need to get inspired. The world is a better place when we’re all chasing our dreams and winning, so I’m just looking to contribute to other people’s lives . Thank you.

  26. Methodology seems a bit flawed by how he described it. Needs to perform his experiment again a few times with different experts.

  27. Timing: People needed extra income as a result of the recession, which is why airBnB and Uber succeeded. That makes sense to me. Where I lack clarity is why did those very same people that needed extra income to choose to start spending again, and not only spend again, but spend (1) on new and unproven business service sectors and (2) in a category of spending, vacation/travel and taxi/travel, respectively, that I think is trivial and associated with play. Anyone have any insight?

  28. This video is significantly important and a must watch for everyone considering startup. Each factor he mentioned has its significant important after thinking through it. I always thought idea will be a high important among all when considering startup, since without idea one cannot even dare think of startup. I guess idea will mean nothing if not executed right. Indeed, timing is the most important because it will help you determine when the market or technology changes, and the right time to acquire the most customers with specific prices. For team, you can not realize your vision without the team. Hiring the right team is extremely important for any startup, because it is the team that plays a key role in understanding and executing the vision. Then follow with idea, business model and funding which I strongly agree with.

  29. Listen to Tony Robbins podcast on this guy. This guy is unbelievable. Check it out: https://www.tonyrobbins.com/podcasts/unicorn-founder-bill-gross/

  30. It's not about the right timing nor the right place but the right process, perfect time for god sake will never come you have to manipulate and modify your business according to the ecosystem and environmental

  31. This TED talk description does not do him justice as an authority in this topic.

    FYI, Bill Gross is the ONLY person in history to have started/ incubated 7+ Unicorns (Companies that exceed 1 Billion dollar valuation). Elon Musk barely has 3.

    I know him from Tony Robbins' Business Mastery. So much respect to him.

  32. He may sound right to certain degree of retrospective, however the PETZL analytics perspective would have proven not on favor.; scientifically. Because on his view a reference from his own personal experiences, that is only related to specific market; tech companies. Worse yet he could not predict or forecast most of these mentioned businesses Uber, AirBnB in his graph meet failure. So were their start-up at the right time? Most business in Tech industry were not a success based on timing as if they founders were sitting at a bus stop of opportunity.

    AirBnB 4:24 was not because a recessionary gap. We also need to see Supply and Demand, as it happened to Singaporean Companies Booking (1996) and Agoda (1998) focused on Hotels only, because Hostels were not profitable, they were too traditional and saturated, someone said "let's change the trends".

    Why AirBnB was passed on? Investors saw it coming… it was a risky Business to try to mess with Real Estate Industry.

    UBER 2:52 a USA transportation company with the " Ride Sharing " idea was not new, this concept was already used in Panama City C.A and in the Bronx, New York among gypsy Cabs.

    In respective, the automobile was the result of the steam engine from the Concept Create The Necessity and definitely not a success story from Timing, We see it in the Home appliance industry they produced then take to market. Ok let's suppose timing is the main factor, but Funding is the motivating factor without funding Timing is not important, ' the bus is coming, i don't have enough change '.

    Then Skilled team, we see many great project fails (see TechCrunch) due to the scarce of capability in the Tech Industry universities are not producing qualified and skilled tech (data mining) students fast enough. Thinking that Timing is more important than the others, think again, such idea may place your mind at a standby mode, imagining Clint Eastwood telling you * "ask yourself , Do i feeling Lucky.. Punk" * over and over. Belif and Risk are more important, investors take risk based on faith all the times, even is is not the right time.. yet, and with the right management and Sale proposition the chances of success are greater!

  33. This can be extremely biased and inaccurate. He used a tiny data set of 20 companies and labelled each one by himself after knowing whether the companies succeeded or not. So basically I can find another 20 companies, labelled them myself and achieve completely different results. In addition, the statistical analysis he uses is crude. I believe more than one interaction effect (eg. idea + timing) should be added. Overall the result he got from all this is just total bullshit and should never be trusted in any way.

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