TED Talk Tuesday: The Single Biggest Reason Why Startups Succeed

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, and you will get them to achieve unbelievable things.

But Bill Gross, founder of Idealab, a business incubator focused on new ideas, had one question: If the startup organization is so great, why do so many fail? He was determined to find out once and for all what it takes for a business to truly thrive. And according to his TED Talk: The Single Biggest Reason Why Startups Succed, it starts with a great team, a great business model, funding, timing, and the idea.

“Everybody has a plan, until they get punched in the face.” That’s something boxer Mike Tyson once said, but Gross believes it’s also true about business. 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 Gross came to think that the team may be the most important element in a startup’s success. But is there more to it?

Gross wanted to dig deeper, so he started look at the business model. Does the company have a very clear path generating customer revenues? Then he looked at funding. Sometimes companies received immense amounts of funding, so maybe that’s the most important thing? And, of course, there’s timing. Is the idea way too early and the world’s not ready for it? Is it just right? Or is it too late, and there are already too many competitors? The idea matters, too—that “aha!” moment when you first come up with the concept for your business.

Gross considered all of these factors. He examined all 100 Idealab companies, and 100 non-Idealab companies to try to come up with something scientific—some kind of blueprint that maps out success. He looked at wild successes, like Airbnb, Instagram, Uber, and Youtube. And he also considered a few failures, like Kozmo, Pets.com and Friendster. In the end, he realized one key thing—timing.

Timing accounted for 42 percent of the difference between success and failure. Team and execution came second, and the idea, the differentiability of the idea, the uniqueness of the idea—that actually came in third.