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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
succeed the most,
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what factors actually matter the most
for startup success.
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I believe that the startup organization
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is one of the greatest forms
to make the world a better place.
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If you take a group of people
with the right equity incentives
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and organize them in a startup,
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you can unlock human potential
in a way never before possible.
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You get them to achieve
unbelievable things.
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But if the startup
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
actually matters most
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for startup success.
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And I wanted to try
to be systematic about it,
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avoid some of my instincts
and maybe misperceptions I have
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from so many companies
I've seen over the years.
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I wanted to know this because
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I've been starting businesses
since I was 12-years-old
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when I sold candy at the bus stop
in junior high school,
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to high school, when I sold
solar energy devices,
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to college, when I made loudspeakers.
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And when I graduated from college,
started software companies.
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And 20 years ago,
I started Idealab,
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and in the last 20 years,
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
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
the idea was everything.
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I named my company Idealab
and how much I worship
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the "aha!" moment when you first
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,
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
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
punched in the face",
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and I think that's so true
about business as well.
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So much about a team's execution
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is its ability to adapt to getting punched
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
was the most important thing.
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Then I started looking
at the business model.
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Does the company have a very clear path
generating customer revenues?
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That started rising to the top
in my thinking
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about maybe what mattered
most for success.
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Then I looked at the funding.
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Sometimes companies received
intense amounts of funding.
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Maybe that' the most important thing?
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And then of course,
the timing.
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Is the idea way too early and
the world's not ready for it?
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Is it early, as in, you're in advance
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
already too many competitors?
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So I tried to look very carefully
at these five factors
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across many companies.
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And I looked across all 100
Idealab companies,
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and 100 non-Idealab companies
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to try and come up with
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, GO TO,
NetZero and tickets.com--
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those all became billion dollar successes.
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And the give companies on the bottom --
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Z.com, insider pages, myLife,
Desktop Factory, People Link--
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we all had high hopes for,
but didn't succeed.
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So I tried to rank across all
of those attributes
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how I felt those companies scored
on each of those dimensions.
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And then for non-Idealab companies,
I looked at wild successes,
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like airbnb and Instagram and Uber
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
in some cases,
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but they didn't succeed.
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I tried to look at what factors
actually accounted the most
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for success and failure across
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
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,
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
the idea isn't important,
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but it very much surprised me that
the idea wasn't the most important thing.
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Sometimes it mattered more when
it was actually timed.
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The last two, business model and funding,
made sense to me actually.
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I think business model
makes sense to be that low
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because you can start out
without a business model
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and add one later if your customers
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
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
intense funding.
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So now let me give you some specific
examples about each of these.
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So take a wild success like Airbnb,
everybody knows about.
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Well, that company was famously
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
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,
a good idea, great execution,
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is the timing.
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That company came out
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
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,
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
into the system.
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Drivers were looking for extra money,
it was very, very important.
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Some of our early successes, City Search,
came out when people needed web pages.
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Goto.com, which we announced
actually at TED in 1998,
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was when companies were looking for
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
maybe more important.
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And then some of our failures.
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We started a company called Z.com,
it was an online entertainment company.
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We were so excited about it --
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we raised enough money,
we had a great business model,
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we even signed incredibly great
Hollywood talent to join the company.
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But broadband penetration
was too low in 1999-2000.
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It was too hard to watch
video content online,
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you had to put codex in your browser
and do all this stuff.
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The company actually went out
of business in 2003.
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Just two years later,
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when the codex problem
was solved by Adobe Flash
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and when broadband penetration
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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Youtube didn't even have a business model
when it first started.
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It wasn't even certain that
that would work out.
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But that was beautifully,
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
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 being in denial about
any results that you see,
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because if you have something you love,
you want to push it forward,
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but you have to be very, very honest
about that factor on timing.
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As I said earlier,
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I think startups can change the world
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
have a slightly higher success ratio,
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and thus make something great
come to the world.
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that wouldn't have happened otherwise.
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Thank you very much,
you've been a great audience.
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(Applause)