Why Timing Matters for Start-Ups

by Justin Reynolds on Apr 28, 2017 8:00:00 AM

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Every entrepreneur has dreams of turning their start-up into the next Facebook, Google, or Amazon. But unfortunately, a vast majority of those dreams never become reality. In fact, 90% of start-ups fail.

Why is that?

It takes guts to start a business. The odds are overwhelmingly stacked against you. But just because most startups fail doesn’t mean that yours will suffer the same fate. In a recent TED Talk, Bill Gross — the founder of Idealab — shared his thoughts on what he now believes is the most critical component of start-up success.

Initially, Gross believed that a start-up would only succeed if it was built from the right idea. But his experiences changed that perception. Over time, Gross grew to believe that the idea wasn’t necessarily as important as the people who powered the company.

“I never thought I’d be quoting boxer Mike Tyson on the TED stage, but he once said, ‘Everybody has a plan until they get punched in the face,’” Gross said. “And I think that’s so true about business as well. So much about a team’s execution is its ability to adapt to getting punched in the face by the customer.”

Over time, Gross’s positioned evolved even further. He wondered whether having the right business model was the most essential ingredient for a start-up to have. Not happy with that assessment, Gross then focused on funding — ultimately realizing that wasn’t the most important thing either because start-ups with tons of dollars behind them fail too.

So what is the most important thing a start-up needs to become successful? The right timing.

“Timing accounted for 42 percent of the difference between success and failure,” Gross explained after analyzing 200 different companies. “Team and execution came in second, and the idea, the differentiability of the idea, the uniqueness of the idea, that actually came in third.”

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SOURCE: GIPHY

The specific example Gross uses to highlight the importance of timing is the wild success of Airbnb. Many investors passed on the company because they believed that people wouldn’t be willing to rent out space in their own homes to folks they didn’t know. And who could blame them?

But because Airbnb found itself in the right place at the right time, Gross argues, the company became a wild success.

“One of the reasons it succeeded, aside from a good business model, a good idea, great execution, is the timing,” Gross said. “That company came out right during the height of the recession when people really needed extra money and that maybe helped people overcome their objection to renting out their own home to a stranger.”

Same goes for YouTube. Gross talked about starting Z.com, a company that planned to focus on online entertainment in video format. Unfortunately, there weren’t enough broadband subscribers in 1999 and 2000. In order to watch video online, users needed to install a number of codecs — something that was problematic for the average person. For these reasons, the company was eventually forced to shutter its doors in 2003.

“Just two years later, when the codec problem was solved by Adobe Flash and when broadband penetration crossed 50 percent in America, YouTube was perfectly timed,” Gross said. “Great idea, but unbelievable timing. In fact, YouTube didnt even have a business model when it first started. It wasnt even certain that that would work out. But that was beautifully, beautifully timed.”

Per Gross, if you want your start-up to succeed, you have to make sure its release is perfectly timed and that customers are ready for what you have to offer. Otherwise, you can build the best company in the world and nobody might ever find out about it.

 

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This post was written by Justin Reynolds

Justin Reynolds is a freelance copywriter, journalist, and editor based in Connecticut.

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