I am obsessed with entrepreneurship. I started a landscaping business when I was 15 to afford paying for college and since then, I have mentored and worked with hundreds of startups.
When you have that many data points, you start to pick up on patterns. Here is my take on the most important factors when starting a new venture. As the title suggests, it is a hypothesis that I hope you will give feedback on.
Trend
What wave are you riding? Are you in a growing, mature, or declining market? Hint: You want to be in the growing market.
You could have the best team, the most resources, and the best business model, but that isn’t going to matter if you are selling Cable TV in 2020.
Look into macro-trends and ask yourself what problems are going to grow in size and importance over the next decade.
Timeline
A startup is a team of people actively pursuing discovery of a business model that is repeatable and scalable. What this means in simpler terms is that a startup is looking for a way to repeatedly and sustainably make money and grow the amount of money they make over time.
With that in mind, I would like to say the timeline or runway that a startup has is crucial. Startups need enough time to run enough experiments to find a model that will repeatedly generate revenue at scale.
This section from The Innovator’s Dilemma comes to mind:
“Research has shown that the vast majority of successful new business ventures abandoned their original business strategies when they began implementing their initial plans and learned what would and would not work in the market. The dominant difference between successful ventures and failed ones is not the astuteness of their original strategy. Guessing the right strategy at the outset is not nearly as important to success as conserving enough resources (or having relationships with trusted backers or investors) so that new business initiatives get a second or third stab at getting it right. Those that run out of resources or credibility before they can iterate towards a new strategy are the ones that will fail.”
The goal is to maximize the timeline you have to achieve traction with your new venture without running out of resources or damaging your credibility.
Team
Simply put, do I firmly believe you are going to build this new innovative product or service? Do you have the right experience, the necessary skill sets, and the needed resources to take your idea and make it into something real?
Timing
Timing is a fickle thing.
If you are too early: nobody understands what you are selling, the technology hasn’t advanced enough, or the problem doesn’t exist yet.
If you are too late: the market is saturated with competition, there are mostly “copy-cat” products and not any value-add products, and barriers to entry are tall with barbed wire.
Similar to the story of Goldilocks, you don’t want your timing to be too cold or too hot, you want your timing to be just right.