How to be Part of the 10% of Successful Startups
by Kim Grennan
By now it’s fairly common knowledge that the failure rate of startups is extremely high. Today, approximately one out of ten startups actually succeed. The bigger question is why do so many startups fail?
Often it’s due to the very first step — the most crucial, and most avoidable step — in the startup journey.
The Journey of the Billion-Dollar Idea
The light bulb goes off. You just had an idea for the next great app, software or product that is going to solve a tremendous need. How can this not exist yet? Surely the guys at Shark Tank will bite on this one. After all you’ve evaluated the market landscape, growth potential, competitors, opportunities, and validated current assumptions about your potential customers’ pain points and needs. Right?
Well…chances are, probably not. This is all too common. In fact, Fortune reported 42% of startup founders cited “lack of market need for their product” as the number one reason their idea stalled out.
Why do so many entrepreneurs fail to see if their assumptions are right?
Turns out this is an extremely challenging process to go through, especially when most startups are solo operations or very lean teams. The resources simply aren’t there. But going through the process can mean the difference between going into extreme debt and retiring early on a beach somewhere in the South of France.
What can you do to be a part of the 10% that succeeds?
- Question Your Assumptions
Many entrepreneurs approach a new business venture assuming their assumptions about the market or customer needs are correct. But what if these are incorrect? What if you create something nobody wants? Or worse, could you be leaving an even bigger opportunity on the table?
You have to confirm your assumptions otherwise you could be overlooking larger problems or better solutions you could be pursuing.
2. Find the White Space
The single most important thing you can do as a startup is identify the “white space.”
Simply put, white space represents market opportunity. Broken down, this is where you zero in on where you can attack a market — how you can offer a product that is highly differentiated from anything else out there, and sufficiently fulfill a real need, desire or pain point. Think of it as gaining market intelligence. To find the white space, there are some essential questions that need to be answered. A few include:
- How big is the market and what segments exist?
- What are the trends, risks and opportunities?
- Who are the competitors and what are their business models? Are they profitable?
- Do potential customers actually even want or need this?
- How much will it cost to acquire a customer?
3. Play in the Sandbox
Let’s take a quick jaunt down memory lane. Did you ever play in the sandbox when you were a kid? If so, think about how you typically approached the sandbox. Often you’d go in with an idea of what you wanted to create — maybe a massive castle with a moat, a humble village, or maybe a statue of your favorite cartoon character.
Once in the sandbox, however, this plan might shift based on tools available to you, what your friends were building, whether the sand was wet or dry, and the list goes on. You took a few minutes to gain intel and pivoted from there. This helped ensure you didn’t waste precious recess time simply pushing sand around.
Building a successful business requires the same approach — gaining market intelligence to validate whether or not an opportunity exists, then developing a strategy before you spend your time, money and resources building it.
Remember, building a business on just an idea, is the worst idea.
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Kim Grennan is a Sr. Venture Associate at Tallwave, an innovation services firm that provides design, user validation, development, branding, marketing, and customer acquisition services that help build products users love — and get them to market, fast.