There are a lot of platitudes that people turn to when you ask them what startups do in order to become successful. The list of things people say reads more like a list of qualities startups are supposed to have rather than distinguishing factors that could mean the different between success and failure. People with experience in the field say things like startups that are ahead of their time and ambitious in their desires end up successful. However, these are qualities that pretty much all startups have anyway. We are talking about billion dollar enterprises here. We are talking about true, inspiring stories.
The reason that these qualities don’t always lead to billion dollar success is because the stats say so. People assume that all startups out there end up becoming billion dollar enterprises because of a little thing called confirmation bias. It is the same thing that makes people think that airplanes are more dangerous than cars even though the statistics say otherwise. Even if a miniscule percentage of airplanes end up seriously crashing, the ones that do make front page news and the 99% of planes that safely reach their destination aren’t seen to be as newsworthy.
We can see a similar trend in statistics regarding startups. If you look at last year, about nineteen thousand startups were operating that were all designed to tackle a wide variety of different issues. Out of these nineteen thousand, only a grand total of fifty seven startups ended up being valued at a billion or over that amount. That means that an almost inconsequential percentage of startups end up actually being worth the amount of money that you expect them to be.
What does this mean? Does this mean that the startups that end up being valued at a billion dollars are products of pure dumb luck? It would be easy to go with this assumption, but the truth of the matter is that all startups that end up getting valued at a billion dollars or more actually do share some traits and qualities with one another. The purpose of this article is to shed some light on what these qualities and characteristics are. If more startups were to adopt some of these characteristics, it is possible that they might see more success than they are currently witnessing as well.
The 5 Characteristics of a Billion Dollar Startup
#1 Top Notch Execution
Pretty much all startups out there have a goal that they are trying to meet, and they also have a plan that describes how they intend to meet said goal. However, execution is where a lot of these companies end up falling short, and it is fair to say that this problem starts with the person responsible for smooth execution, the Chief Executive of the company. The CEO of the company needs to be decisive, strong willed and relentless in their work ethic, leading by example and showing all of the other employees of the company how it’s done.
However, the CEO and the other founders of the company are not the only ones that need to conform to this specific kind of work ethic. They also need to form a team of people that are dedicated to their cause as well, people that will go above and beyond to try and achieve the goals that they are trying to achieve. This includes selecting a board of directors that is impartial and possesses the level of expertise necessary to take the startup to a whole new level.
#2 Offer Enthralling Products to an Undiscovered Market
Now this is clearly something that a lot of startups are going to have a tough time doing. After all, it’s not easy to discover a new market. However, the trick to this is that you don’t really need to discover a market that is completely untouched. Much on the contrary, you just need to find a market that is being exploited but not to its full potential. You then need to think of products that are compelling, enticing and above all solve a problem that the market is trying to fix.
If you create a compelling product and introduce it to a market that does not have many competitors in it beforehand, you are already well on your way to seeing a tremendous amount of success. Every customer has a need that is somehow not being met, so your product needs to help them meet this need. It needs to be something that makes their daily routine a little easier to deal with. Timing is key of course, because you’re not the only one that’s looking for a good opportunity. You need to make sure that when you enter a certain market you are doing so at a time where no one else would be able to step in.
#3 Ensuring Limitless Scalability
The billion dollar startups that are being studied nowadays all managed to make their initial investment go an incredibly long way. Expanding the company is something that will definitely cost an enormous amount of money, and startups that are just starting out would definitely not have access to this kind of capital. This is why they need to make themselves as scalable as possible. The money earned from the initial idea should in and of itself be enough to allow you to grow at least until you can save up enough capital to stimulate aggressive expansion.
The problem with expansion is that it requires you to funnel money into your research and development, and you will also need to spend a lot of money in order to market the products you are making and make people want to buy them. This can only happen if you have good sales in the first place, but it is also necessary to get good sales. You can see the dilemma here. Dealing with it well can mean the difference between success and failure.
#4 Creating The Right Kind of Marketing Plan
One of the first things that startups start working on, sometimes even before they have the particulars of the engineering or manufacturing process for the products that they will be creating, is a marketing plan. A marketing plan allows businesses to gauge their future growth opportunities and gives a realistic estimate about how much the company is intending to sell. The only problem is that marketing plans are, by their very nature, incredibly idealistic. A lot of the things you plan to do end up not panning out.
This is why it is essential to first understand how much your product is worth and then convincing consumers that it is more than worth it. It is also important to try and penetrate niches, attempt to utterly conquer them and then move on from there. It is also very important to remember that if you’re having difficulty meeting your sales targets and the like, it does not necessarily mean that your product or service is not going to find success in the long run. Rather, it is an indication that you might not be targeting the right people, or perhaps the niche you are going for is too broad and needs to be narrowed down a little before it can work.
#5 Being Cognizant of Investor Expectations
Getting seed funding is an excellent first step to take. However, it really only is a first step. There are a lot of other things that need to be kept in mind as well if you want to be able to maintain the relationship that you currently have with your investors. Failing to understand what it is that they want and not being able to give it to them is a big reason why relationships between startups and investors end up souring after a short period of time, thereby making it difficult for startups to get the level of success that they are looking for.
You first need to figure out what your investor wants. Do they want to see a high growth rate? Are they looking for an early pay day and would want to see some revenue generation? It is very important to keep a line of communication open between yourself and your investors, but at the same time it is important to be cognizant of your investors potentially abusing their relationship with you. If you are running a startup, you are the captain of the ship, and investor desires shouldn’t force you to completely change the way you are approaching the business that you are currently in.
Why All This Matters
At the end of the day, it is highly unlikely that you will be able to create a startup that ends up being valued at over a billion dollars. However, there is also a dearth of information that can actually help startups get to the next level. If you have it in you to create a startup in the first place, this obviously means that you already have drive, determination and passion. The characteristics listed above are things that you can do in order to get to the next level.
While the chances of becoming a billion dollar startup are miniscule, it is also important to note that a billion dollars is an absurd amount of money. There is nothing wrong with being a hundred million dollar startup, an amount of money that is similarly large and a lot easier to attain. Even ten million dollar startups do very well for themselves and are a lot less stressful to manage as well. The aforementioned tips can help you achieve any level of success you want.