The rate at which a startup grows has long been a big determinant of startup success. While growth matters, over 70% of startups fail because of premature scaling. This finding and 10 more listed below will help you make wiser decisions based on previous failures, successes and data-backed conclusions.
1) Mentored startups grow 3.5x faster and raise 7x more money. Entrepreneurs are constantly pulled in many directions. Business success can be amplified with the support of the right mentor who, above all, helps the founder focus and invest time wisely. The experience and connections of the mentor provide entrepreneurs with a roadmap with a higher probability of success.
2) Over 70% of startup founders eventually realize that their intellectual property is not a competitive advantage. Entrepreneurs often start with an idea they strongly believe is unique and innovative. Most founders quickly realize that the idea, product or process alone, even if legally protected, is not valuable without execution.
3) Technical co-founders are critical to enterprise focused startups but not as important for consumer products. Teams with a technical co-founder perform 230% better in enterprise companies since products that serve enterprises require a higher level of technical performance. Not having a technical co-founder shouldn’t stop you from capturing a business opportunity as long as you are working with a committed technical lead like a CTO.
4) Startups founded by non-technical teams outperform technical founders of consumer companies. They perform 31% better.
5) Founders need 2 to 3x longer than they expect to validate a business model. Validating an idea takes time and requires listening and intuition. Just like an intellectual property does not necessarily differentiate a startup from the competition, ideas, even if they seem unique, require several rounds of customer interviews and product iterations before they become products people love, use and recommend.
6) Most innovations (42%) fail due to a long development time. Selecting the wrong idea to innovate represents 32% of innovation failures. There is always something to do to make an idea or a product more innovative and defensible. Most innovations fail because entrepreneurs invest more resources to improve a product without involving the customer and testing their willingness to pay and use it.
7) Founders of failed startups have a 20% higher chance to succeed their next venture. Most startups that failed could have predicted their failure sooner before investing more resources. Failing fast and being open to new directions will eventually lead to future successes. Overnight success can take over ten years.
8) Entrepreneurs are more likely to get a loan request approved from a small local bank. Small banks approve 48.7% of loans requests as compared to 23% by big banks. Only a fraction of startups is venture backed, most companies are self-funded through savings. Loans can be cheaper than equity financing especially when the startup is growing.
9) Entrepreneurs raise more money today. The median seed round increased by 300% from $272K to $750K between 2010 and 2016. The increase in funds is due to startups’ increased dependence on paid acquisition channels for growth, especially e-commerce products. To support growth, the average Series A round increased by 250% from $4.9 to $12.1 million between 2010 and 2017.
10) Companies that presell their products and services close 40 to 50% more leads and retain 80 to 90% more customers.
In conclusion, the data provides us with a clear formula that can significantly increase the chances of building a successful startup. Surround yourself with mentors and team members with complementary skills, launch and iterate fast, if needed, fail quickly, test ideas through presales, boost startup value with your own resources and finally, raise the necessary funds to accelerate growth.