I was taking my morning walk today, listening to TED Talks, as I often do, and the second talk that came up on my feed was a speech by someone named Bill Gross. The topic of the conversation was, “What factors matter most for startup success?”
Before listening to this speech, I knew only one Bill Gross: the founder of Pimco.
But this was clearly another Bill Gross. He was an entrepreneur — and a very successful one at that. One of his big successes was Idealab, a startup generator he founded in 1996. It has launched more than 125 companies with 40 IPOs. Some of its successes include Answers.com, Picasa, Tickets.com, and GoTo.com.
Here was someone who knew something about success! And his knowledge came from experience (Erfahrung) rather than books (Wissen). I listened once, and then, I listened again.
Gross explained he had been asking himself the very same question I’d been asking all these years and decided to take a more formal approach to finding an answer. He analyzed 100 startups Idealab sponsored and 100 others from the outside, and he rated how those companies scored against five factors:
- The idea
- The team
- The business plan
- The funding
- The timing
Much of what he discovered did not surprise me. The business plan, for example, was at the bottom of the list.
As Gross explained, business plans are probably the least important factor in starting a new business because the truth is you really don’t know how your business should grow until you have started it.
Plus, and this I’ve explained in all my books on entrepreneurship, new businesses grow in starts and stops, with all sorts of zigzags in between. I’ve never seen a business plan that worked longer than six months during the early stages of growth. If business plans are to be useful at all, they must be short, vague, and nonspecific.
The second least important factor was funding. I’ve already explained to you my experience with funding: how having insufficient capital can hurt, but having lots of capital can sometimes hurt worse.
So, the three most important factors, according to the study Gross did, were theidea, the team, and the timing.
I found that interesting. Idea and team (leadership), as I’ve just explained, were the very two factors that had ended up on the top of my list of “what matters most in business.” So, good, I thought. I can feel comfortable about emphasizing those factors in my next essay.
But I was surprised to hear timing was, for Gross, an important factor in business success. In fact, it was at the top of his list. It accounted for 42% of the successful launches he analyzed.
“How could that be?” I wondered. Timing was not even on my list.
Gross gave the example of AirBnB and how plenty of investors passed on the idea and said, “Nobody’s going to invite total strangers into their home.” But what the investors weren’t seeing was AirBnB was launching right during the 2008 recession, when people were desperate for cash any way they could get it.
He goes on to explain Uber’s success can be attributed to the same phenomenon: People were looking for extra money, and driving offered a great opportunity.
I thought about my own experience in terms of timing. Had timing been a factor? I could think of a few examples where it had been.
Gross’ conclusion was the ideas and the leadership team are very important, but the timing is equally important — maybe even the most important thing.
And the takeaway, he said, was entrepreneurs should recognize that having a great idea and a great team to execute it might not be enough. If you come out of the gate at the wrong time, then the business will fail.
“If you have [an idea] you love, you want to push it forward, but you have to be very, very honest about that factor on timing.” In other words, it’s not enough to have a great business concept; you also need to make sure the audience is ready for it.
So, What Matters Most?
Those are words of wisdom. Falling in love with a business, a product, or a marketing idea is a great mistake. I learned that long ago, spending time and money on ideas I loved, only to discover after the launch the marketplace wasn’t interested in them.
The business media love to tell stories of entrepreneurs who risked everything and lost everything but continued to fight through failure after failure, until finally, success was theirs. They don’t tell you these are the rare exceptions. For every stalwart businessperson who succeeded this way, there were 100 who failed.
I see these stories as validation of Bill Gross’ point about timing. All those years of repeated failures were not the result of leadership, nor of a good business plan, nor of an idea. Nor were they the result of funding. Rather, they were the result of proper timing. When the market was ready for the idea, it worked. Before then, it didn’t.
The lesson here is not about tenacity; it’s about timing.
My rule is: When I launch a new business or product, and it doesn’t work well right from the start, I shut it down. I don’t keep at it, spending more money and time, just because I want to be right. I take the failure as a sign from the business gods telling me, “Not now. Try later.”
So, I do think timing is a very, very important factor. And I’m grateful to Bill Gross for pointing it out to me.
But I don’t actually believe timing is the most important thing. I still think the most important component is the leadership team.
Here’s my logic: If the idea is wrong, it won’t work. If the timing is wrong, it won’t work. If the team is wrong, but the idea and timing are right, it will work—but only for a certain length of time. After that, the business also subsides. It might even fail.
That happened with one of my businesses about 10 years ago. I hired a CEO who put into place a marketing campaign that had been written before he came on board. The campaign was a great success, fueling the business’s growth from $3 million to $28 million in a single year. But three years later, the business was down to $5 million and had become unprofitable. I had to put the business under different leadership, and today, it is making millions.
What I’m saying is this: The team, the idea, and the timing are all equally important. If you want to maximize your chances of success in business, make sure you have all three.
Recognize that ideas and timing are interconnected. You need the right idea at the right time.
But since you can’t control the timing, you need more than one good idea. You need a good idea for now… and a good idea for next year… and a good idea for the year after that.
And how will you get and develop and execute those good ideas? With a great leadership team!
You can’t force a good idea to work if the timing is wrong. But with a superstar team, you can recognize when the timing is wrong and develop other ideas that make sense for now.
In conclusion, then, let’s agree idea, timing, and team are all very important. But as an entrepreneur or CEO, the smart move is to devote most of your time and attention to developing a superstar team and then tasking that team with creating lots of good ideas and testing them in the marketplace to find the one that is perfectly timed for great success.