The single biggest reason why startups succeed
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0:01 - 0:03I'm really excited to share with you
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0:03 - 0:06some findings that really surprise me
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0:06 - 0:08about what makes companies
succeed the most, -
0:08 - 0:12what factors actually matter the most
for startup success. -
0:13 - 0:15I believe that the startup organization
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0:15 - 0:19is one of the greatest forms
to make the world a better place. -
0:20 - 0:23If you take a group of people
with the right equity incentives -
0:23 - 0:25and organize them in a startup,
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0:25 - 0:29you can unlock human potential
in a way never before possible. -
0:29 - 0:31You get them to achieve
unbelievable things. -
0:32 - 0:34But if the startup
organization is so great, -
0:34 - 0:35why do so many fail?
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0:35 - 0:37That's what I wanted to find out.
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0:37 - 0:39I wanted to find out what
actually matters most -
0:39 - 0:41for startup success.
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0:41 - 0:43And I wanted to try
to be systematic about it, -
0:43 - 0:46avoid some of my instincts
and maybe misperceptions I have -
0:46 - 0:48from so many companies
I've seen over the years. -
0:48 - 0:49I wanted to know this
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0:49 - 0:52because I've been starting businesses
since I was 12 years old -
0:52 - 0:55when I sold candy at the bus stop
in junior high school, -
0:55 - 0:57to high school, when I made
solar energy devices, -
0:57 - 0:59to college, when I made loudspeakers.
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0:59 - 1:02And when I graduated from college,
I started software companies. -
1:02 - 1:04And 20 years ago,
I started Idealab, -
1:04 - 1:07and in the last 20 years,
we started more than 100 companies, -
1:07 - 1:10many successes, and many big failures.
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1:10 - 1:11We learned a lot from those failures.
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1:12 - 1:15So I tried to look across what factors
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1:15 - 1:18accounted the most for company
success and failure. -
1:18 - 1:19So I looked at these five.
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1:19 - 1:20First, the idea.
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1:20 - 1:23I used to think that
the idea was everything. -
1:23 - 1:25I named my company Idealab
for how much I worship -
1:25 - 1:27the "aha!" moment when you first
come up with the idea. -
1:27 - 1:28But then over time,
-
1:28 - 1:32I came to think that maybe the team,
the execution, adaptability, -
1:32 - 1:34that mattered even more than the idea.
-
1:34 - 1:38I never thought I'd be quoting
boxer Mike Tyson on the TED stage, -
1:38 - 1:40but he once said,
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1:40 - 1:45"Everybody has a plan, until they get
punched in the face." (Laughter) -
1:45 - 1:48And I think that's so true
about business as well. -
1:48 - 1:50So much about a team's execution
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1:50 - 1:54is its ability to adapt to getting punched
in the face by the customer. -
1:54 - 1:56The customer is the true reality.
-
1:56 - 1:57And that's why I came to think
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1:57 - 2:00that the team maybe
was the most important thing. -
2:00 - 2:02Then I started looking
at the business model. -
2:02 - 2:05Does the company have a very clear path
generating customer revenues? -
2:05 - 2:08That started rising to the top
in my thinking -
2:08 - 2:10about maybe what mattered
most for success. -
2:10 - 2:11Then I looked at the funding.
-
2:11 - 2:14Sometimes companies received
intense amounts of funding. -
2:14 - 2:16Maybe that's the most important thing?
-
2:16 - 2:17And then of course,
the timing. -
2:17 - 2:20Is the idea way too early and
the world's not ready for it? -
2:20 - 2:24Is it early, as in, you're in advance
and you have to educate the world? -
2:24 - 2:24Is it just right?
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2:24 - 2:27Or is it too late, and there's
already too many competitors? -
2:27 - 2:30So I tried to look very carefully
at these five factors -
2:30 - 2:31across many companies.
-
2:31 - 2:33And I looked across all 100
Idealab companies, -
2:33 - 2:35and 100 non-Idealab companies
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2:35 - 2:37to try and come up with
something scientific about it. -
2:38 - 2:40So first, on these Idealab companies,
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2:40 - 2:42the top five companies --
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2:42 - 2:45Citysearch, CarsDirect, GoTo,
NetZero, Tickets.com -- -
2:45 - 2:47those all became billion-dollar successes.
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2:47 - 2:49And the five companies on the bottom --
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2:49 - 2:52Z.com, Insider Pages, MyLife,
Desktop Factory, Peoplelink -- -
2:52 - 2:54we all had high hopes for,
but didn't succeed. -
2:55 - 2:58So I tried to rank across all
of those attributes -
2:58 - 3:01how I felt those companies scored
on each of those dimensions. -
3:01 - 3:05And then for non-Idealab companies,
I looked at wild successes, -
3:05 - 3:08like Airbnb and Instagram and Uber
and Youtube and LinkedIn. -
3:08 - 3:09And some failures:
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3:09 - 3:11Webvan, Kozmo, Pets.com
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3:11 - 3:12Flooz and Friendster.
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3:12 - 3:14The bottom companies had intense funding,
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3:14 - 3:17they even had business models
in some cases, -
3:17 - 3:18but they didn't succeed.
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3:18 - 3:21I tried to look at what factors
actually accounted the most -
3:21 - 3:23for success and failure across
all of these companies, -
3:23 - 3:25and the results really surprised me.
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3:25 - 3:27The number one thing was timing.
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3:28 - 3:30Timing accounted for 42 percent
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3:30 - 3:33of the difference
between success and failure. -
3:33 - 3:35Team and execution came in second,
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3:35 - 3:36and the idea,
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3:36 - 3:38the differentiability of the idea,
the uniqueness of the idea, -
3:38 - 3:40that actually came in third.
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3:40 - 3:42Now, this isn't absolutely definitive,
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3:42 - 3:44it's not to say that
the idea isn't important, -
3:44 - 3:48but it very much surprised me that
the idea wasn't the most important thing. -
3:48 - 3:50Sometimes it mattered more when
it was actually timed. -
3:50 - 3:54The last two, business model and funding,
made sense to me actually. -
3:54 - 3:56I think business model
makes sense to be that low -
3:56 - 3:58because you can start out
without a business model -
3:58 - 4:02and add one later if your customers
are demanding what you're creating. -
4:02 - 4:03And funding, I think as well,
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4:03 - 4:06if you're underfunded at first
but you're gaining traction, -
4:06 - 4:07especially in today's age,
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4:07 - 4:09it's very, very easy to get
intense funding. -
4:09 - 4:13So now let me give you some specific
examples about each of these. -
4:13 - 4:15So take a wild success like Airbnb
that everybody knows about. -
4:15 - 4:19Well, that company was famously
passed on by many smart investors -
4:19 - 4:20because people thought,
-
4:20 - 4:23"No one's going to rent out a space
in their home to a stranger." -
4:23 - 4:24Of course, people proved that wrong.
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4:24 - 4:26But one of the reasons it succeeded,
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4:26 - 4:29aside from a good business model,
a good idea, great execution, -
4:29 - 4:30is the timing.
-
4:30 - 4:33That company came out
right during the height of the recession -
4:33 - 4:35when people really needed extra money,
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4:35 - 4:37and that maybe helped people overcome
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4:37 - 4:40their objection to renting out
their own home to a stranger. -
4:40 - 4:41Same thing with Uber.
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4:41 - 4:42Uber came out,
-
4:42 - 4:44incredible company,
incredible business model, -
4:44 - 4:45great execution, too.
-
4:45 - 4:47But the timing was so perfect
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4:47 - 4:49for their need to get drivers
into the system. -
4:49 - 4:52Drivers were looking for extra money;
it was very, very important. -
4:52 - 4:56Some of our early successes, Citysearch,
came out when people needed web pages. -
4:56 - 4:58GoTo.com, which we announced
actually at TED in 1998, -
4:58 - 5:02was when companies were looking for
cost-effective ways to get traffic. -
5:02 - 5:03We thought the idea was so great,
-
5:03 - 5:06but actually, the timing was probably
maybe more important. -
5:06 - 5:07And then some of our failures.
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5:07 - 5:11We started a company called Z.com,
it was an online entertainment company. -
5:11 - 5:12We were so excited about it --
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5:12 - 5:15we raised enough money,
we had a great business model, -
5:15 - 5:18we even signed incredibly great
Hollywood talent to join the company. -
5:18 - 5:20But broadband penetration
was too low in 1999-2000. -
5:20 - 5:23It was too hard to watch
video content online, -
5:23 - 5:25you had to put codecs in your browser
and do all this stuff, -
5:25 - 5:28and the company eventually
went out of business in 2003. -
5:28 - 5:29Just two years later,
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5:29 - 5:32when the codec problem
was solved by Adobe Flash -
5:32 - 5:36and when broadband penetration
crossed 50 percent in America, -
5:36 - 5:38YouTube was perfectly timed.
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5:38 - 5:39Great idea, but unbelievable timing.
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5:39 - 5:43In fact, YouTube didn't even have
a business model when it first started. -
5:43 - 5:45It wasn't even certain that
that would work out. -
5:45 - 5:47But that was beautifully,
beautifully timed. -
5:47 - 5:49So what I would say, in summary,
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5:49 - 5:52is execution definitely matters a lot.
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5:52 - 5:53The idea matters a lot.
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5:53 - 5:55But timing might matter even more.
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5:55 - 5:57And the best way to really assess timing
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5:57 - 5:59is to really look at whether
consumers are really ready -
5:59 - 6:01for what you have to offer them.
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6:01 - 6:03And to be really, really honest about it,
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6:03 - 6:05not be in denial about
any results that you see, -
6:05 - 6:08because if you have something you love,
you want to push it forward, -
6:08 - 6:11but you have to be very, very honest
about that factor on timing. -
6:11 - 6:12As I said earlier,
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6:12 - 6:15I think startups can change the world
and make the world a better place. -
6:15 - 6:17I hope some of these insights
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6:17 - 6:20can maybe help you
have a slightly higher success ratio, -
6:20 - 6:22and thus make something great
come to the world -
6:22 - 6:24that wouldn't have happened otherwise.
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6:24 - 6:26Thank you very much,
you've been a great audience. -
6:26 - 6:27(Applause)
- Title:
- The single biggest reason why startups succeed
- Speaker:
- Bill Gross
- Description:
-
Bill Gross has founded a lot of start-ups, and incubated many others — and he got curious about why some succeeded and others failed. So he gathered data from hundreds of companies, his own and other people's, and ranked each company on five key factors. He found one factor that stands out from the others — and surprised even him.
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 06:40
Brian Greene edited English subtitles for The single biggest reason why start-ups succeed | ||
Morton Bast edited English subtitles for The single biggest reason why start-ups succeed | ||
Morton Bast edited English subtitles for The single biggest reason why start-ups succeed | ||
Morton Bast edited English subtitles for The single biggest reason why start-ups succeed | ||
Morton Bast edited English subtitles for The single biggest reason why start-ups succeed | ||
Morton Bast approved English subtitles for The single biggest reason why start-ups succeed | ||
Morton Bast edited English subtitles for The single biggest reason why start-ups succeed | ||
Morton Bast edited English subtitles for The single biggest reason why start-ups succeed |