There are myriad theories as to what makes a successful startup. Heavy investment. Endless man-hours. Visionary leaders. Sharp marketing. An inherent element of “cool.”
Young company Juicero had enough of the above to seduce investors, raking in an astonishing $120 million. Nonetheless, they closed up shop earlier this year. Why? The product was a wi-fi enabled juicer, which, for all its fanfare, was “trying to solve a problem that didn’t exist.”
There’s much focus on startups that have already set up shop, but Small Business Economics examined promising “nascent entrepreneurs,” those in the pre-startup phase. After all, before worrying about growing the plant—about the amount of sunlight vs. water, about which fertilizer to buy, how to protect it from weeds and insects—how do you know which seeds are worth planting?
Scholars Marco van Gelderen, Roy Thurik, and Niels Bosma found that various factors contributed to the startups that made sense to invest in. They studied characteristics of the team, financial sense, environmental stressors, previous business experience, leadership; yet, almost in passing, as if it should be taken for granted, they affirmed, “In the end business success should be primarily a question of market selection and not of other factors.”
This may seem like common sense, but there are a number of startups that seemed to have overlooked this basic factor. Blippy allowed you to link your Twitter account with your credit card so that each purchase would be publically showcased (before you laugh, it raised $13 million. And before you rush out with your own ideas, it struggled and then essentially closed in 2011.)
Honestly.com seemed to have a useful idea: known as the ‘Yelp’ for people, where people could write reviews about you (professionally). It raised $1.2 million, but attracted negative attention, and eventually rebranded and pivoted to a different approach, turning into a recruiting service.
We can’t underestimate the importance of other factors in the success or failure of a startup. Even a brilliant idea can sputter, stall, or fail in the wrong hands, or if up against too many obstacles. And within the factors that contribute to direct success, there are details which can make or break the deal. (For example, a brilliant leader and the right team may not matter if the leader is a woman, and she’s operating in an environment that has significantly less trust for women, or she has significantly less trust in herself.) Nonetheless, the crux of success remains largely unchanged.
As TechCrunch wrote in analyzing the trajectory of Blippy, the start-up failed because it broke the cardinal rule: “Make something people want.”