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I'm really excited to share with you

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some findings that really surprise me

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about what makes companies [br]succeed the most,

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what factors actually matter the most[br]for startup success.

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I believe that the startup organization

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is one of the greatest forms[br]to make the world a better place.

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If you take a group of people [br]with the right equity incentives

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and organize them in a startup,

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you can unlock human potential[br]in a way never before possible.

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You get them to achieve [br]unbelievable things.

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But if the startup [br]organization is so great,

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why do so many fail?

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That's what I wanted to find out.

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I wanted to find out what[br]actually matters most

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for startup success.

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And I wanted to try [br]to be systematic about it,

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avoid some of my instincts[br]and maybe misperceptions I have

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from so many companies[br]I've seen over the years.

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I wanted to know this

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because I've been starting businesses[br]since I was 12 years old

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when I sold candy at the bus stop[br]in junior high school,

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to high school, when I made[br]solar energy devices,

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to college, when I made loudspeakers.

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And when I graduated from college,[br]I started software companies.

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And 20 years ago,[br]I started Idealab,

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and in the last 20 years,[br]we started more than 100 companies,

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many successes, and many big failures.

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We learned a lot from those failures.

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So I tried to look across what factors

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accounted the most for company[br]success and failure.

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So I looked at these five.

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First, the idea.

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I used to think that [br]the idea was everything.

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I named my company Idealab[br]for how much I worship

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the "aha!" moment when you first[br]come up with the idea.

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But then over time,

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I came to think that maybe the team,[br]the execution, adaptability,

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that mattered even more than the idea.

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I never thought I'd be quoting[br]boxer Mike Tyson on the TED stage,

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but he once said,

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"Everybody has a plan, until they get[br]punched in the face." (Laughter)

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And I think that's so true[br]about business as well.

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So much about a team's execution[br]

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is its ability to adapt to getting punched[br]in the face by the customer.

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The customer is the true reality.

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And that's why I came to think

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that the team maybe[br]was the most important thing.

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Then I started looking[br]at the business model.

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Does the company have a very clear path[br]generating customer revenues?

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That started rising to the top[br]in my thinking

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about maybe what mattered[br]most for success.

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Then I looked at the funding.

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Sometimes companies received[br]intense amounts of funding.

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Maybe that's the most important thing?

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And then of course,[br]the timing.

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Is the idea way too early and[br]the world's not ready for it?

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Is it early, as in, you're in advance[br]and you have to educate the world?

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Is it just right?

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Or is it too late, and there's[br]already too many competitors?

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So I tried to look very carefully[br]at these five factors

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across many companies.

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And I looked across all 100[br]Idealab companies,

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and 100 non-Idealab companies

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to try and come up with [br]something scientific about it.

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So first, on these Idealab companies,

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the top five companies --

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Citysearch, CarsDirect, GoTo,[br]NetZero, Tickets.com --

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those all became billion-dollar successes.

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And the five companies on the bottom --

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Z.com, Insider Pages, MyLife,[br]Desktop Factory, Peoplelink --

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we all had high hopes for,[br]but didn't succeed.

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So I tried to rank across all [br]of those attributes

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how I felt those companies scored[br]on each of those dimensions.

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And then for non-Idealab companies,[br]I looked at wild successes,

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like Airbnb and Instagram and Uber[br]and Youtube and LinkedIn.

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And some failures:

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Webvan, Kozmo, Pets.com

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Flooz and Friendster.

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The bottom companies had intense funding,

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they even had business models[br]in some cases,

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but they didn't succeed.

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I tried to look at what factors[br]actually accounted the most

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for success and failure across[br]all of these companies,

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and the results really surprised me.

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The number one thing was timing.

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Timing accounted for 42 percent

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of the difference[br]between success and failure.

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Team and execution came in second,

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and the idea,

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the differentiability of the idea,[br]the uniqueness of the idea,

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that actually came in third.

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Now, this isn't absolutely definitive,

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it's not to say that [br]the idea isn't important,

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but it very much surprised me that[br]the idea wasn't the most important thing.

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Sometimes it mattered more when [br]it was actually timed.

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The last two, business model and funding,[br]made sense to me actually.

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I think business model[br]makes sense to be that low

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because you can start out[br]without a business model

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and add one later if your customers[br]are demanding what you're creating.

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And funding, I think as well,

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if you're underfunded at first[br]but you're gaining traction,

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especially in today's age,

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it's very, very easy to get[br]intense funding.

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So now let me give you some specific[br]examples about each of these.

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So take a wild success like Airbnb[br]that everybody knows about.

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Well, that company was famously[br]passed on by many smart investors

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because people thought,

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"No one's going to rent out a space[br]in their home to a stranger."

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Of course, people proved that wrong.

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But one of the reasons it succeeded,

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aside from a good business model,[br]a good idea, great execution,

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is the timing.

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That company came out[br]right during the height of the recession

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when people really needed extra money,

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and that maybe helped people overcome

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their objection to renting out[br]their own home to a stranger.

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Same thing with Uber.

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Uber came out,

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incredible company,[br]incredible business model,

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great execution, too.

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But the timing was so perfect

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for their need to get drivers[br]into the system.

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Drivers were looking for extra money;[br]it was very, very important.

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Some of our early successes, Citysearch,[br]came out when people needed web pages.

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GoTo.com, which we announced[br]actually at TED in 1998,

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was when companies were looking for[br]cost-effective ways to get traffic.

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We thought the idea was so great,

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but actually, the timing was probably[br]maybe more important.

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And then some of our failures.

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We started a company called Z.com,[br]it was an online entertainment company.

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We were so excited about it --

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we raised enough money,[br]we had a great business model,

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we even signed incredibly great[br]Hollywood talent to join the company.

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But broadband penetration[br]was too low in 1999-2000.

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It was too hard to watch[br]video content online,

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you had to put codecs in your browser[br]and do all this stuff,

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and the company eventually[br]went out of business in 2003.

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Just two years later,

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when the codec problem[br]was solved by Adobe Flash

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and when broadband penetration[br]crossed 50 percent in America,

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YouTube was perfectly timed.

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Great idea, but unbelievable timing.

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In fact, YouTube didn't even have[br]a business model when it first started.

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It wasn't even certain that [br]that would work out.

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But that was beautifully, [br]beautifully timed.

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So what I would say, in summary,

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is execution definitely matters a lot.

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The idea matters a lot.

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But timing might matter even more.

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And the best way to really assess timing

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is to really look at whether [br]consumers are really ready

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for what you have to offer them.

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And to be really, really honest about it,

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not be in denial about[br]any results that you see,

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because if you have something you love,[br]you want to push it forward,

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but you have to be very, very honest[br]about that factor on timing.

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As I said earlier,

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I think startups can change the world[br]and make the world a better place.

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I hope some of these insights

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can maybe help you[br]have a slightly higher success ratio,

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and thus make something great[br]come to the world

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that wouldn't have happened otherwise.

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Thank you very much,[br]you've been a great audience.

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(Applause)