Startup myths

Discovering the key factors that contribute to a startup’s success is crucial. Many people believe certain myths about what it takes to create a billion-dollar startup, such as having a founder who dropped out of an Ivy League school or having multiple cofounders handling different aspects of the work. However, recent data collected from 30,000 sources since 2017 reveal that the reality is different. For example, there were more founders with PhDs than dropouts and only a small percentage of unicorns participated in an accelerator program. Additionally, many successful projects were based on ideas that had previously failed rather than being first-to-market.


Age, Education, and Co-Founders are Not Predictors of Success

The story of successful startups founded by Ivy League dropouts or multiple cofounders handling different aspects of the work may discourage aspiring entrepreneurs. However, age, education, and the number of cofounders are not predictors of a startup’s success. A study by Tamaseb reveals that the median age for billion-dollar founders is 34, and power struggles and arguments about vision are two common pitfalls of many startups, problems that do not exist when there’s only one founder. Additionally, 36 percent of unicorn founders held a bachelor’s degree, 22 percent held an MBA, and about 33 percent held some other advanced degree. Similarly, while many founders went to top-notch schools, just as many graduated from schools that weren’t nationally ranked in the top 100.


Tamaseb’s study also found that about 60 percent of unicorn founders had previously launched startups. This previous experience provided them with industry contacts to find employees and investors to help get their startups off the ground. And, most importantly, they were more likely to have learned from their mistakes. Natural-born builders were another common trait among unicorn founders. Even before college, they were already tinkering. For instance, Mark Zuckerberg got together with his classmate Adam D’Angelo to build Synapse, a desktop music player, in high school.


The study concludes that age, education, and the number of cofounders are not the key factors in a startup’s success. Instead, previous startup experience and a natural-born desire to build and create are better predictors of success. Aspiring entrepreneurs should not let preconceptions and myths hold them back from pursuing their dreams, as success can come from a variety of backgrounds and experiences.


Key Factors for Starting a Successful Company: Idea, Passion, and Flexibility

Starting a successful company requires more than just a great idea. While previous success in founding a company may be a predictor of future success, most good startup ideas don’t come as sudden realizations. Instead, successful founders usually choose a market or trend and then look for problems to solve in that space. For instance, Tinder solved a problem for single people, YouTube unlocked a new asset with content, and Airbnb helped travelers find affordable accommodation.


The key to success is combining opportunity with a sense of purpose. Investors look for founders who are driven by passion because they’re more likely to withstand the difficulties that come with starting a company. Passionate founders are more resilient and can better handle the various pitfalls down the line.


Flexibility is also important for success. Many unicorns, or startups valued at over $1 billion, started out as something else. Founders who are willing to pivot and adapt are more likely to find opportunities and succeed in the long run. Pivoting shows that they’re dedicated to finding opportunities and are not emotionally attached to their ideas.


However, pivoting should be a last resort because it entails throwing away years of work and gambling with the confidence of the team and investors. The market is ultimately more important than the idea, and founders should know when to listen and adapt to the market.


Additionally, a company’s team is a critical factor when it comes to investment decisions. VCs like to thoroughly vet a company’s team before investing, and a study conducted by the Stanford Graduate School of Business found that 53 percent of investors considered a company’s team the most important factor when deciding where to invest. Successful founders assemble star teams by offering job titles and strong salaries to attract the best talent.


Starting a successful company requires a combination of need, passion, flexibility, and a strong team. Passion is essential to withstand the difficulties of starting a company, while flexibility is crucial for finding opportunities and pivoting when necessary. 


Understanding market demand


The Importance of Understanding Market Demand and Differentiation for Startups

In 2012, cryptocurrency was still a new concept that most people had never heard of. But the founders of Coinbase saw an opportunity to create a safe and easy way for anyone to buy Bitcoin, which at the time was only accepted by a few sites and required a high level of technical know-how to trade with. By keeping up with government regulations and understanding their market, Coinbase flourished and differentiated itself from competitors.


While many unicorns choose to compete in markets that already have strong demand, Tamaseb’s data shows that unicorns competing in established markets are actually valued slightly higher than those in new markets. However, what makes a big difference is when a company differentiates itself from competitors, with highly differentiated ideas grabbing attention and interest.


Additionally, creating a painkiller rather than a vitamin pill is a market advantage, as painkillers aim to relieve a customer’s painful need while vitamin pills aim to give customers more value or entertainment. Tamaseb’s data shows that while around a third of unicorns create vitamin pills, sustaining them over time is more challenging as they are more susceptible to competitors and the novelty wears off.


Ultimately, the key to success is understanding the market and how your idea is different. By identifying a market with huge growth potential and understanding how your product will differentiate from others, you can create a successful and sustainable business. While there is no advantage to creating a new market versus competing in an established one, differentiation and creating a painkiller rather than a vitamin pill are important factors to consider.


The Importance of Timing and Asking ‘Why Now’ in Startup Investment

When it comes to investing in startups, VC investors tend to be wary of ideas that have been tried before and failed. However, sometimes those ideas failed simply because the timing was wrong. A prime example of this is General Magic, who built a smartphone back in 1995 with an inadequate touch screen and poor battery life, at a time when most people weren’t yet hooked into email. Twelve years later, when Apple launched the iPhone, the timing couldn’t have been more perfect. Similarly, Google and Facebook were not the first of their kind, but they found success when the timing was right.


Tamaseb’s data shows that there is no clear advantage between being the first to market with an idea versus trying to do something that has been done before. Instead of worrying about whether an idea has been tried before, it’s better to ask “Why now?” Is the necessary technology there? Is there a potential customer base to tap into? What can be learned from other companies’ previous failures?


Warby Parker is an example of a startup that succeeded by asking “Why now?” They saw a market dominated by giants with unreasonably high prices and cumbersome cost structures and realized that there was an opportunity for disruption. By designing in-house, selling straight-to-consumer, and implementing a nimble business strategy, they were able to charge a fraction of what their competitors did.


Tamaseb’s data also shows that more than 50 percent of unicorns faced off against giant competitors. Instead of being an obstacle, these competitors are a sign that there is a large and thriving market, and startups are perfectly positioned to disrupt and succeed without being tied down by decades-old legacy systems.


However, it’s important for startups to defend their product, especially against competitors who may try to copy their investment. VC investors are particularly sensitive to this, as they want to ensure their investment is protected.


The Benefits of Bootstrapping and Capital-Efficient Business Models

If you have a great product, funding may not be the only factor in achieving success. Venture capitalists (VCs) are often attracted to high-risk, high-reward startups, as they stand to gain a potentially unlimited return on their investment. However, not all startups require massive amounts of capital investment, and depending on the idea, it may be more beneficial to bootstrap for a couple of years to determine the company’s market viability.


Sara Blakely, the founder of Spanx, is a prime example of a successful entrepreneur who launched her company with just $5,000 of her own savings and never took a single investment. By doing all her own marketing, PR, and customer service in the first few years, Blakely was able to maintain 100% ownership of the company when it reached a billion-dollar valuation.


Running a capital-efficient business model can be better for both founders and investors, as it allows for a higher return on investment with less dilution and more profit for stakeholders. Katrina Lake, the founder of Stitch Fix, faced difficulty raising capital in the early stages of her personal shopping startup. To combat this, she learned to be efficient by using GoogleDocs and Excel, working with interns to process orders, and restructuring the company’s cash cycle to move products quickly. By focusing on hiring the best data scientists and achieving early profitability, Stitch Fix was able to gain a strong understanding of the economics underlying their business. When it eventually went public at a valuation of $1.6 billion, Lake became the youngest woman to ever do so.


While VC investment can be beneficial for some startups, it’s not always necessary for success. Depending on the idea and the amount of capital required, bootstrapping for a couple of years can help determine the company’s market viability and lead to a more capital-efficient business model. By focusing on efficiency and profitability early on, startups can achieve a strong understanding of their economics and attract the best talent, ultimately leading to success without the need for massive amounts of funding.


While Facebook and Apple have become models for success, numerous other startups have achieved great success in their own way. Despite various myths circulating in Silicon Valley, data suggests that the key predictors of unicorn success include having big dreams, a thorough understanding of the market, and previous experience in running a startup.

Inspired by a book  “Super Founders”; Ali Tamaseb


6 minutes read

Myths and Realities of Startup Success

Common myths about what it takes to build a billion-dollar startup are debunked by recent data, which reveals surprising realities and key factors for success.