Are You Modeling Your Startup Success Based on Extreme Outliers?
It's easy to look at the incredible success stories of companies like Facebook, Uber, and Airbnb and think "that could be me someday!" After all, most of these companies were started by regular people who had a good idea at the right time. However, it's important to realize these are extreme outliers and not the norm for startups. Most startups fail. The failure rate is extremely high in the first five years. And venture-backed startups, which have significant financial resources, fail even faster than bootstrapped companies .
Rather than modeling your business after the unicorn startups, it's better to be realistic and plan for sustainability. Here are some tips:
Shooting for unicorn status can be thrilling, but building a startup is hard work over many years. Most succeed by staying lean, nimble, and serving customers exceptionally well. This path may not garner headlines, but is more likely to lead to a sustainable, profitable business in the long run. The unicorns are extraordinary exceptions, not the rule. So be inspired by their success, but don't pin your startup dreams on becoming the next mythical unicorn. With a realistic plan and excellent execution, you can still build a great business that makes an impact.
Another key factor is timing. Many unicorn startups were also in the right place at the right time. For example, Facebook launched when broadband internet was becoming mainstream in homes and mobile phones were taking off. Uber's 2009 launch coincided perfectly with smartphones reaching mass adoption. A few years earlier or later and these companies may not have reached the same level of success.
As an entrepreneur, you can't always predict when the stars will align for your industry. Rather than trying to catch the same wave, look for emerging trends you can ride in a sustainable way. Some signs a startup idea may be riding a fleeting fad rather than an enduring trend:
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Startups based on fads often flame out quickly when the hype dies down. Those solving real needs can taper growth as needed but continue building value over time.
When launching a new startup, it's tempting to try and make a big splash by launching with an expansive vision. However, most successful startups take the opposite approach - start by doing the smallest viable thing possible first, then scale up carefully over time.? This might mean launching an minimum viable product to test your biggest assumptions before fully building out the technology and features. Or finding a tiny niche audience to service before expanding to a broader market.
The advantages of starting small:
Once you have traction and proof of concept, then you can consider scaling up. This may mean expanding to new customer segments, adding more product capabilities, hiring more team members, or raising venture funding . But first build a small engine that works. Over time you can add more fuel and scale the engine bigger. Skipping straight to rapid scaling multiplies both cash burn and risk of failure. Many unicorns took the "start small" approach in their early days. Focusing first on specific customer needs allowed them to refine their models and ready them for explosive growth when the timing was right.
As an entrepreneur, think big for the vision but start small for the execution. Let your success with early customers and simplicity guide how rapidly to scale up over time. Modeling your startup based on outliers is often counterproductive. Instead, plan for sustainability through serving customers, watch for emerging trends, and be ready to adapt. Build a startup on solid fundamentals first.