What do successful startups do differently than ones that fail? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Tim Chae, General Partner @ 500 Startups, on Quora:

To build anything meaningful and lasting (including startups), I believe you need to start at the intersection of the where you believe the world is going (macro market shifts) and your innate unfair advantages. Successful companies are those who nail that intersection and execute, while unsuccessful companies are those who don't do that well.

That said, the make up of a successful startup ultimately breaks down into three factors: market (along with timing), team (along with execution), and founders (along with recruiting/strategy).

Market is about the ultimate size of the market, but I also view it as the timing. On the timing front, I think most companies who fail to succeed on this factor is either because they enter too early and are under prepared for how long it may take for the market to appear, or they enter too late and are under prepared for how much of a better product it takes to unseat incumbents ("10x Product, Not 10% Better"). On the market size, it needs to be "big enough" for all of its shareholders to be happy with a successful outcome. Not all startups need to be venture backed and each investor at each stage are looking for different scales of outcomes.

Team is about the execution ability of a startup in all facets of its business (from product, tech, sales, marketing, and beyond). There's a bar of quality of talent you need to clear that's pretty clear across all successful startups, but because 500 invests very early and oftentimes is the first institution investor on the cap table, I put a lot of attention to the team's speed to execute on (right) ideas. Speed is the only real advantage startups have over its incumbents. I think the greatest difference between successful investments for us and those that are not tend to be how long it takes for teams to just get to work on a solution (vs debating about it). I fundamentally believe that at these early stages that 500 invests, if teams have a habit of having endless debates and meetings, they are killing the only chance they have to win.

I look at Founders as the greatest telltale sign of the startups ability to add talent (recruiting) and resources (fundraising, sales, etc.) down the road. Every successful startup requires both. While there are exceptions to the rule in everything, successful startups require addition of top tier talent and that oftentimes falls directly on the founders' ability to recruit. I don't care about the size of the founders' direct network per se, but the bet I'd be making on these early stage companies when I'm looking to invest is in their ability to close "deals" when qualified prospects are introduced.

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Published on: May 7, 2019