Every Venture Capitalist or Investor that I have met in the past has answered this question very differently. You’d think that the experienced investors know what is the most essential element in a successful start-up. Yet surprisingly, their answers vary drastically. Even they admit that a lot of decisions are still based largely on gut feeling more than on data. The bulk of answers usually mention ‘idea’, or ‘access to a large market’ or ‘experienced founders’ and so on.
Few elements of a Startup
To answer the question, let’s look at some of the key elements in an average start-up. The list is exhaustive so I will keep it simple. A start-up usually begins with an idea, with a potential market (paying customer), executed by a team of motivated individuals. There is plenty of researches showing that a majority (60% to 80%) of start-ups fail within the first 5 years.
Idea
While ‘Idea’ is important, we all know of someone who just sits on an idea or gets surprised when someone has the same idea as them. The universal fact is that it is extremely unlikely that you are either the first or the only one to have thought of the idea. Over zealously guarding your idea is futile. If ideas could be copied so easily then we would not have such a high rate of failure among start-ups. After all, a large majority of start-ups are just a run-of-the-mill e-commerce idea. Of course, the idea is important but not the critical factor.
Access to a large potential market
It is a huge benefit to have access to a large addressable market. But there are plenty of start-ups to have failed miserably despite having access to large potential markets. Take Microsoft’s ‘Zune’ for example, touted as Apple’s iPod killer but was shut down after losing millions of dollars. Or Barnes & Nobles ‘Nook’ – launched in 2009 and lost in oblivion without denting the success of Amazon kindle.
The team
This brings us to the most essential element of a start-up, the ‘team’. To be clear, it is about the experience, knowledge or skill set of individuals. It is about how well the team works together.
It is the cohesion in the team which ensures that the idea is executed and leveraged to its full potential. This is the most essential element of a successful start-up.
Based on my experience, our start-up would win funding rounds mainly because the investors had faith in our team. They knew that even though numbers are down this quarter the team had what it took to turn the corner. They felt that as a unit we were capable of achieving great results. Get in touch if you’d like to know more or just to discuss ideas!
A team that works well together can turn an average idea into a successful business. Whereas a team that doesn’t ‘click’ together is unlikely to pull off even the greatest of ideas.
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