Do you want your startup to succeed? If so, passion is important, yet it's over-rated. But let's be fair -- the reason that passion is often touted is that founders face such daunting odds against success. In order to keep going in the face of what at times seem like an endless stream of setbacks, you must have enough passion for the problem you're trying to solve to push yourself forward when more "normal" people would walk away.
But passion alone will not help you realize your startup dreams. For that my interviews with hundreds of founders -- some successful and many less so -- is that you need to do more than just feel passion for your project. Here are the other four things you must do.
1. Focus on unrelieved customer pain.
One thing I've learned from talking with founders is that it's hard to get potential customers to sign up with a startup. That's because potential customers know that the odds are good your company won't be around in a few years.
Indeed based on my interviews with dozens of venture capitalists, the odds of an unfunded startup growing to the point that it's worth at least $1 billion -- what is dubbed a unicorn -- are a miniscule one in five million.
That's based on the assumption that the typical venture capitalist meets with 1,000 startups a year (either in person or virtually) and invests in two. Meanwhile, the typical venture-backed startup has a one in 10,000 chance of becoming a unicorn.
Perhaps the most important way to boost your odds of success is to solve the right problem. By that, I mean solve a problem that satisfies two tests:
- Customers are feeling pain because the problem is not solved; and
- No other companies -- large or small -- are trying to solve it
If you are trying to solve a problem that satisfies those two tests, then customers can either try your product or continue suffering from their unrelieved pain. That's why so many startups are founded by people who had pain, could not find a product to relieve that pain, and started a company to solve it.
2. Make sure no well-established companies are trying to relieve that pain.
It is really important not to try to solve a problem that a big company is already solving -- unless you can provide a much better solution than what big companies are offering. The reason should be obvious -- a customer will view it as much less risky to buy from the established company.
Here's an example of a company that ignored this advice: Zoom Communications. The founder of Zoom was an executive at Cisco Systems after Cisco bought WebEx -- which he co-founded. He knew the videoconferencing market was crowded when he started Zoom -- but he saw first-hand how in his view Cisco was infuriating customers.
So he set up Zoom to provide customers with a much more pleasing solution. Since its April 2019 IPO, Zoom shares have risen some 55 percent and the company now sports a $25.5 billion stock market capitalization.
3. Have world-beating skill in the areas needed to solve the problem.
Having passion and doing the first two things I mentioned is still not enough. You have to be possessed of world-class skills to design and build a product or service that will relieve the customer pain.
This brings to mind a team of students a few years ago that proposed to spend the semester working on a company that would develop a universal SIM card. The students came from India and when they arrived in the U.S. for classes, they had to purchase a SIM card that would give their phone access to the U.S. telecommunications networks.
They thought that there would be a considerable business opportunity available if they could build a SIM card that would enable their phone to work wherever in the world they traveled. Sadly, when I asked whether anyone on their team had the technical expertise required to build that product, they said they did not.
Don't waste time trying to solve a customer problem unless your team has the skills needed to build a world-class solution.
4. Target a market opportunity worth at least $1 billion.
Finally, you can't run a successful startup unless you can raise capital. And investors are not interested in companies that are targeting markets smaller than $1 billion.
The math is simple. Investors assume you will not get more than 10 percent of the market you're targeting. And in general companies can't go public -- enabling investors to make money -- unless their revenues are at least $100 million and are growing at 30 percent or faster.
Passion plus these four things give you a shot at your startup dreams.