Major Drivers of Startup Success

A new idea is hatched. The entrepreneur sets a new business venture in motion. There’s a ton of excitement and visions of the venture generating cash, wealth and fame. If a team is assembled, they are looking forward to riding a wave of success, or a rapidly growing paycheck (for the skeptical types). However, a few hiccups occur along the way….

Unproven Business Model

Many entrepreneurs focus too much on the business concept instead of designing and executing an appropriate business strategy. They believe a good product will stand out and sell itself. They build the product, open the store, and then realize that not enough people are rushing through the door. Progress is slow because pre-existing competitors spend lots of money on building awareness and marketing their products. It is foolhardy to assume a startup does not require some of the same. Market analysis and financial acumen are needed to figure out how to earn revenues and profits.

Startups must assess the needs and cost of acquiring different types of customers and carefully choose the target market. Unfortunately, even entrepreneurs with a “great” product fail because they spend all their money on building the product or setting up shop without figuring out what the customers want. It is like carefully cooking a plate of seasoned chicken to sell to vegetarians. It is critical to execute a well thought out strategy that is clearly focused on confirmed market needs.

Stronger Copycats

Most startup ventures are based on an idea that is believed to be unique. The founders expect the startup to grow rapidly and become a dominant player in the sector. Alas, it is guaranteed that every successful business venture will soon be copied. Other entrepreneurs and established companies in the same sector will develop similar offerings to sell to the market. Thus, the first mover must avoid being an unfortunate guinea pig. Otherwise, the second and third mover can side-step mistakes made by the first mover to become much more successful (think about AOL and Yahoo versus Google, or Myspace versus Facebook).

Idealism is great because it inspired the entrepreneur to initiate the venture. Realism, however, wins the day. The entrepreneur must figure out the specific offering and selling price that enable the startup to get the required level of customer revenues. After the initial launch, the first mover must keep innovating and raise growth capital for marketing its product and to strengthen its position. Flexible business plans and financial projections are required.

Partnership – Are Two Heads Really Better Than One?

Startups are often cash strapped because the founders do not have limitless financial or technical resources in the early days. After bootstrapping from the beginning, initial founders are eventually forced to partner with other co-founders that bring additional financial, technical or other resources. However, the world is littered with startups that failed because the partners did not have complementary visions, styles, or working relationship. One partner may want to sell $1,500 laptops throughout the US while the other partner wants to sell tablet devices specifically in the New York market only. Also, the bond between the partners must be strong enough to withstand lots of rejection and the dark days that almost every startup faces in the marketing and capital raising efforts. As a result, angel investors and venture capital firms keenly watch out for strong history and chemistry between startup management teams.

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