Why Do Some Startups Succeed While Others Fail? [INFOGRAPHIC]
This infographic from the Startup Genome Project 2.0 is based on a comprehensive 2015 report on startup structure, ecosystems, and disruptive industry trends.
Why are startups such an important business structure in the 21st century? The Startup Genome Project 2.0 suggests that the 20th century saw the first massive shift in corporate structure in an attempt to deal with problems such as managing an enterprise over vast geographic distances, building and managing multiple customer segments and building brands to engage the newly emerging U.S. middle class.
Then the Information Era provided technology that allowed for instant connectivity between customers and business, plummeting cost of entry for new ventures and global competition.
According to the report, $1 trillion of the U.S. GDP is accounted for by 9 tech companies that barely existed 15 years ago: Apple, Amazon, Google, Salesforce, VMware, Facebook, Twitter, Groupon, and Zynga. These companies started as startups.
So what is a startup? One of their defining characteristics is that they are risky. According to the report, "Traditional small businesses have around 75% success rates over their first two years. Startups-even with VC backing-have a 75% chance of failing."
"Ultimately, a business fails because it runs out of money. But there are a multitude of reasons why this can happen. Management teams, business models, access to markets, finance, ideas, timing and the abilities of the entrepreneur themselves are all factors that can influence the failure of startup," writes Jon Card in The Guardian.
Don't you just need an original idea? It turns out that isn't a deciding factor.
"Entrepreneurs need to understand it's not about innovation, it's about implementation," Hari Mann, a technology entrepreneur and lecturer at Ashridge Business School in Hertfordshire, told The Guardian. "Great entrepreneurs are really good at implementing small changes to existing ideas."
According to the report, there are a few factions that make it more likely that a startup will succeed:
1.) A-Players: "Have the vision, execution, risk-taking profile, listening skills, leadership, and fear of failure to create things no one else has before, often with very little direction."
2.) Close proximity: "Early stage startups can change course multiple times a day, with core team members working late into the night. Workspaces are often not even separated so everyone can stay on the same quickly changing page."
3.) Feedback loops: "With limited money (time) and exposure in their hands, entrepreneurs need access to customer feedback. Mentors often help with strategizing, marketing, financing, taxes, legalities, and pacing. Entrepreneurs with mentors saw 3.5 times more growth and 7 times more investment than those without mentors."
4.) An ecosystem with built-in experience: "Certain geographic regions have had decades of drastically higher startup concentrations."
The Startup Genome Project 2.0 explores the cities where startups seem to have the best chance of success. It also includes information about how much funding startups tend to have, the gender of founders and other data. Check of this infographic for more specifics.