The single biggest reason why startups succeed

I'm really excited to share with you

some findings that really surprise me

about what makes companies
succeed the most,

what makes factors
actually matter the most

for startup success.

I believe that 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,

organize them in a startup,

you can unlock human potential

in a way never before possible.

you get them to achieve
unbelievable things.

But if the startup organization is so great,

why do so many fail?

That's what I wanted to find out.

I wanted to find out what
actually matters most

for startup success.

I wanted to try to be systematic about it,

avoid some of my instincts

and maybe some of
my misperceptions I have

from some of the companies
I've seen over the years.

I wanted to know this because
I've been starting businesses

since I was 12-years-old

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

to high school, when I sold
solar energy devices,

to college, when I made loudspeakers.

And when I graduated from college,

started software companies.

And 20 years ago,

I started Idealab,

and in the last 20 years,

we started more than 100 companies.

Many successes, and many big failures.

We learned a lot from those failures.

So I tried to look across what factors

accounted the most for company
success and failure.

So I looked at these five.

First, the Idea.

I used to think that
the idea was everything.

I named my company Idealab
and how much I worship

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

But then over time,

I came to think that maybe the team,

the execution, adaptability,

that mattered even more than the idea.

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

but he once said,

"Everybody has a plan, until they get
punched in the face",

and that's so true about business as well.

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 I came to think
that the team

maybe was the most important thing.

Then I started looking
at the business model.

Does the company have a very clear path

generating customer revenues?

That started rising to the top
in my thinking

about maybe what mattered
for success.

Then I looked at the funding.

Sometimes companies received
intense amounts of funding.

Maybe that' the most important thing?

And then of course,

the timing.

Is the idea way too early,
and the world's not ready for it?

Is it early,

as in, you're in advance

and you have to educate the world?

Is it just right?

Or is it too late, and there are
too many competitors?

So I tried to look very carefully
at these five factors

across many companies.

And I looked across all 100
Idealab companies,

and 100 non-Idealab companies

to try and come up with something
scientific about it.

So first, on these Idealab companies,

the top five companies--

citysearch, CarsDirect, overture,

NetZero and tickets.com--

those all became billion dollar successes.

And the give companies on the bottom --

Z.com, insider pages,

myLife, Desktop Factory, People Link--

we all had high hopes for,

but didn't succeed.

So I tried to rank across all
of those attributes

how I felt those companies scored
on each of those dimensions.

And then for non-Idealab companies,

I looked at wild successes,

like airbnb and Instagram and Uber

and Youtube and Linkedin.

And some failures:

webvan, kozmo, pets.com

flooz, friendster.

The bottom companies had intense funding,

they even had business models,

in some cases,

but they didn't succeed.

I tried to look at what factors

actually accounted the most

in success and failure across
all of these companies,

and the results really surprised me.

The number one thing was timing.

Timing accounted for 42 percent
of the difference

between success and failure.

Team/ execution came in second,

and the idea, the differentiability
of the idea,

the uniqueness of the idea,

that actually came in third.

Now, this isn't absolutely definitive,

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

but it very much surprised me

that the idea wasn't t
he most important thing.

Sometimes it mattered more when
it was actually timed.

The last two,

business model and funding,

made sense to me, actually.

I think business model made sense
to me that low

because you could start out
without a business model

and then add one later

if your customers are demanding
what you're creating.

And funding, I think as well,

if you're underfunded at first
but you're gaining traction,

especially in today's age,

it's very, very easy to get
intense funding.

So now let me give you

some specific examples
about each of these.

So take a wild success like airbnb,
everybody knows about.

Well, that company was famously
passed on

by many smart investors

because people thought,

"No one's going to rent out
a space in their home

to a stranger."

Of course, people proved that wrong.

But one of the reasons it succeeded,

aside from a good business model,
a good idea,

great execution,

is the timing.

That company came out
right at the height

of the recession.

People really needed extra money,

and that maybe helped
people overcome

their objection to renting out
their own home

to a stranger.

Same thing with Uber.

Uber came out,

incredible company,
incredible business model,

great execution, too.

But the timing was so perfect
for their need

to get drivers into the system.

Drivers were looking for extra money,

it was very, very important.

Some of our early successes, city search,

came out when people needed web pages.

goto.com,

which we announced at TED in 1998,

when companies were looking for

cost effective ways to get traffic.

We thought the idea was so great,

but actually, the timing was probably

even more important.

And then some of our failures.

We started a company called Z.com,

it was an online entertainment company.

We were so excited about it --

we raised enough money,

we had a great business model,

we even signed incredibly great
Hollywood talent

to join the company.

But broadband penetration
was too low in 1999-2000.

It was too hard to watch
video content online,

you had to put codex in your browser
and do all this stuff.

We actually went out of business in 2003.

Just two years later,

when the codex problem
was solved by Adobe Flash

and when broadband penetration
crossed 50 percent in America,

Youtube was perfectly timed.

Great idea, but unbelievable timing.

Youtube didn't even have
a business model

when it started.

It wasn't even certain that
that would work out.

But that was beautifully,
beautifully timed.

So what I would say, in summary,

is execution definitely matters a lot.

The idea matters a lot.

But timing might matter even more.

And the best way to really assess timing

is to really look at whether consumers
are really ready

for what you have to offer them.

And to be really, really honest about it,

not being in denial about
any results that you see,

because if you have something you love,

you want to push it forward,

be very, very honest about
that factor on timing.

As I said earlier,

I think startups can change the world

and make the world a better place.

I hope some of these insights can
maybe help you

have a slightly higher success ratio,

and thus make something great

come to the world

that wouldn't have happened otherwise.

Thank you very much,

you've been a great audience.

(Applause)