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number of various start-ups, compared these key factors across the successful companies in
Idealab and outside of his portfolio. Lets look at each factor and its impact on the success.
market requirements. There are examples of companies who created their business model
after they found a product fit with the market and had a rapid growth. But still, one can go
on without it and hence this factor is ranked 4th in importance for success.
4. The Funding: Companies that out money-raise others succeed where others fail?
People would think as funding a very important factor but it is not true. Companies can
and have shown success without funding to begin with. Funding is just an additional
source which can help to capture the market further but if the product or service is not up
to the level, no amount of funding will save the business. Thus, funding came in as the
last in important success factors.
5. The Timing: Are you too early? Just early? Too late. Right on time?
The most important factor for success in most of the companies compared was found out
to be The Timing of the launch. Timing accounted to 42% of successes relative to failures
in Bills survey of various start-ups. Sometimes, one has a great idea but the market is
just not ready for it and hence the idea is doomed to fail despite of a great team, funding
or business plan. Timing is the most critical factor which defines success for any idea to
take shape and disrupt the market. The timing has to be just right. If you go late into the
market, either the market might have been captured by other player or again the market
may not be ready for the idea as it does not require it anymore. Thus according to Bill,
Timing is the most important and critical factor which makes or breaks the business.
Lets look at various examples which will show the criticality of timing. Take Airbnb
for example, it is currently very big. It has close to 1 million listings with a presence in
192 countries across the world. Being US based, most of its transactions involve at least
one party outside US. Moreover, the product overtime has gone through various changes
according to the market needs and was able to grow with a large user-base. Everyone in
the market thinks it has a great business model to work with. But if you see in the past,
there have been various companies who have worked on Airbnb model but were not able
to make it big in the market. The main difference between Airbnb and all other who came
before it is the Timing. Airbnb came in the market when a huge recession hit around the
world, thus people requiring extra money and hence willing to rent out their rooms to
strangers. The timing factor of Airbnb involved more than the recession factor. It was
launched in Denver in 2008 during the Democratic National Convention. With many
people participating in the convention and obviously staying at hotels, most of the hotels
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were booked completely and there used to be a considerable lack of hotel space and a
place for people to stay. Airbnb saw this opportunity and used it during that time thus
gaining a traction among consumers for a place to live. This also had an additional benefit
as the competitors i.e. the hotel chains did not see Airbnb as a threat since they were not
taking away the customers from them. They were just catering to the excess demand.
With time and good service, it found a good foothold among consumers mainly with word
of mouth publicity and thus established itself. Launching in such situations of high
demand and low supply helps start-ups in acquiring the right type of consumers. The
early adopters who are generally forgiving for a small error as they get what they require
in times when the service offers are quite less. This generates a positive word of mouth
and hence begins the journey of growth of the business.
A similar strategy was followed by Uber. As its main competition was from taxi cab
companies, they researched and analysed countries with high difference between the
supply and demand and entered into those countries. Moreover, with correct timing such
as, they launching their service during when the demand used to be highest for example
during the holidays, when people went out for parties and stayed late, moreover drunk
driving to not be a good thing to do, people increasingly would take cabs to go home.
Moreover, they ran promotions during those times, or during concerts or sporting events
when obviously the demand would be high and individual might be more willing to try
and use a new form of service. This helped them in gaining a large cluster of customers in
one go and by providing a good service to them at these times, increased their presence
with word of mouth publicity. Moreover, it also provided user with ease of access and
booking etc which was not present previously and hence boosting their value in the minds
of consumers. Once the customers know how easy it was to use it, it was only a matter of
time that they start to use the service for most of their work in their daily routine.
Also take the example of an online entertainment company called as Z.com. One can
easily term this company to be ahead of its time. It provided video streaming service as
YouTube does. Even though the idea was same, the biggest cause of its failure can be
termed as it being ahead of its time. It hit the market when internet and especially high
speed broadband penetration was quite low and hence it was unable to gain a proper user
base as general speeds at that time were not even good enough to load a webpage. Just
two years after Z.com went out of market in 2003, YouTube came into the market, with
correct timing when high speed broadband was taking place in users homes and as
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everyone knows how big YouTube is currently. It was all a matter of perfect timing to
enter the market.
whereas other start-ups failed because of mainly of the timing of entering the market.
Most other things such as technology and research is readily available to everyone
especially due to internet access and free knowledge sharing and hence does not create a
competitive advantage to companies. Its the timing and additional service which the
company offers to the users which creates a competitive advantage for the start-ups and
helps it to grow further.
References:
1] http://hbswk.hbs.edu/item/how-uber-airbnb-and-etsy-attracted-their-first-1-000-customers
2]https://www.youtube.com/watch?v=QR6YgWOan8Q What Matters Most in Startup
Success (Bill Gross, CEO at Idealab)
3]https://medium.com/@Timoth3y/how-ubers-failure-in-japan-can-help-startups-everywheredf8bdb079f0e#.cm41ga2y6
4]http://singularityhub.com/2015/04/13/why-startups-like-uber-airbnb-spacex-succeed-whileothers-fail/