How to make your startup successful

Mike Arrington at TechCrunch wrote "Startups must hire the right people and watch every penny, or fail" This was in response to a blog by Jason Calacanis, founder & CEO of Mahalo, who wrote "How to save money running a startup". Both stories stirred up a ton of comments, mostly negative, on why they were wrong, and trashing Calacanis for being a ruthless task master.

I agree with much of what Arrington and Calacanis say, and I love this picture that Mike used in his post to illustrate failure. It is very important for a startup to hire the right people and watch every penny. Bigger companies can make a few mistakes and spend too much money on things, and still do just fine. Startups have no margin for error.

I have worked at five startups (Forte Software, AltaVista, Napster, Bowstreet, Groove Networks), and helped hundreds more. There are some common success factors like;

1. Build a product or service people want
2. Customers are willing to pay for it
3. Competitors can't easily replicate it
4. Assemble the best management team
5. Hire only the best people

Those are all obvious points...but extremely difficult to get right. It only looks easy in retrospect. Most successful startups are unique, one of a kind, at a certain point in time, non-repeatable events. If it was easy or obvious everyone would have already done it, or just copy what has already been successful.

Tony Wright, cofounder of RescueTime, a Ycombinator company, has a great post showing that for every example of success there is a counter-example. Tony points to the following examples;

• “Release Early and Listen to your users” VS “Ignore your Users and Build for Yourself.”
• “Seek out Press early and often” VS “go guerrilla until you have a brilliant product“
• “Failure to scale kills” VS “you can have tons of downtime and still grow like gangbusters“
• “Take more funding than you need” VS “overfunding kills“
• “Viral always wins” VS Google Search (which is not REMOTELY viral).
• “Design is critical for user engagement and trust” VS um…. MySpace. CraigsList. Google.
• “Starting a business on Microsoft technologies is ridiculous” VS MySpace or PlentyOfFish (2-3 people, classic ASP, a few MS servers = millions of bucks)
• Headcount! VS Keeping your team lean to force scarcity (CraigsList and 37Signals)

I talk to hundreds of startups every year. They all have some of the elements of success. VCs invest billions of dollars in startups every year. Every entrepreneur and every VC believes they are going to be successful. Very few are.

There is no secret formula or obvious path to success. Just one common trait...an indomitable desire to succeed against all adversity and doubt. Very few people have this drive and the leadership ability to attract great people to their cause. This drive is indefinable but we know it when we see it. It is sometimes misdiagnosed as being delusional and fanatical. The difference in diagnosis is success or failure. Succeed and you are a brilliant visionary. Fail and you are a delusional loser. The line between them is very fine.

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Comments

[Hendrik]

Hi Don,
again a great post, thanks for that. From the common success factors which one do you think is the hardest one. And do you have an advice on nr 4?
have a great day!
Hendrik

[Ryan]

Never give up! Be thick skinned and let the positive drive you!
All else don't take to heart, yet listen to it to make a better product!

That's our motto!

[tom summit]

My favorite post regarding start up success is by Mark Andreesen http://blog.pmarca.com/2007/06/the-pmarca-gu-2.html

Product/Market fit and rising tides float all boats.

[Jason]

Very good write-up and tips. you can track many of these new public companies on easystockalerts.com. kind of cool!

[NaijaEcash]

Sound tips for a newbie. Toom many scammers parading get rich-quick packages won't like this post anyway. But it is sound advise for anyone that wants to build a solid foundation. I love the part "There is no secret formula for success....." Any serious Entreprenuer just need to work hard.