What's the biggest factor separating successful new ventures from the vast majority that fail?
Recently, one of my colleagues pointed me toward a TED talk given by Bill Gross, an inveterate entrepreneur who also started Idealab. Gross analyzed 200 companies--half of them Idealab alumni--trying to figure out the single most important factor in whether or not they succeeded.
TL;DR: Timing might not be everything, Gross found, but it accounts for more than you might think.
Included in his study were unabashed hits--billion dollar successes like Airbnb, Instagram, Uber and Youtube, plus Idealab's own CarsDirect, NetZero, and Tickets.com. To correct for cognitive bias however, he also looked at companies that didn't live up to their great expectations--things like Webvan, Kozmo, Pets.com and Friendster, and he analyzed their relative strengths in five areas:
1. How good was the idea?
2. How good was the team?
3. How good was the business model?
4. How good was the funding?
5. How good was the timing?
Here's the big surprise: while all five factors were important, the most important factor--accounting for 42 percent of "the difference between success and failure"--was timing.
"Is the idea way too early and the world's not ready for it?" Gross said he asked. "Is it early, as in, you're in advance and you have to educate the world? Is it just right? Or is it too late, and there's already too many competitors?"
As examples, Gross cited Airbnb and Uber. Take Airbnb first. The company had a seemingly crazy idea that very few investors were willing to consider, and an inexperienced leadership team (albeit highly resourceful one). However, its service came out at the height of the recession--when people needed to make extra money, and were more likely to consider doing things like renting a room or even a couch to a stranger. A similar analysis applies to Uber, he said, which also started in a down economy, when people were eager to make a little extra money by driving their personal cars around for strangers.
Contrast that with an online entertainment company called Z.com that Gross was involved with back in 1999, with all kinds of money and access to capital. Its biggest cause of failure, he concluded was that it was simply too early. It hit the market about five years before broadbrand penetration and the ability to watch online video was really solved. Result: By 2003, Z.com was gone, but two years later YouTube took off--largely, Gross said, because it had much better timing.
So when you're ready to become an entrepreneur, find a great team and a great idea. But, Gross advises, "timing might matter even more. ... Really look at whether consumers are really ready for what you have to offer them."
And then be "really, really honest" about the answer.