Many ideas are created every day, and many businesses are opened to support those ideas. But only a fraction of them will stand out.
Your startup has only a 1.28% chance to become a unicorn ($1B+ valuation) after you raised your first round of funding.
Several key traits distinguish exceptional products from mediocre ones.
Is your technology a significant advance or only incremental improvement?
The technology may be your greatest possible asset because it makes your product difficult to copy. For example, proprietary technologies used in Google's search algorithms for query auto-completion make the search engine hard to replicate.
For proprietary technology to give you an edge, it needs to be at least 10 times better in some major way than anything like it. Anything short of a dramatic difference will seem insignificant to users, which means they'll be unlikely to switch from what they're used to.
Is this the right time to sell this technology?
Good ideas work best when the timing is right. You don't want to be launching a new car-sharing app during the COVID-19 pandemic.
Is the market ready for your product?
WebTV tried to launch an internet video broadcasting service in the 1990s, a few years before YouTube did it. But back then, nobody had a stable internet connection, so there was no demand for this product, and the company was forced to close.
The right thing at the wrong time is the wrong thing.
Are you targeting a big share of a small market?
Entering over-saturated markets is a recipe for failure for most startups.
On the contrary to the conventional belief that in order to succeed in the market, you must outlast your competitors, what you should really do is to avoid the competition by building monopolies on yet uncaptured markets.
Google controls 92.41% of all search traffic; Amazon marketplaces combined drive 5x more traffic than their closest competitor — eBay.
The only way to achieve extraordinary success in business is by creating monopoly products.
Do you have the right people on your team?
Who is there on the battlefield with you? The team of founders must have a complementary set of skills to cover the essential parts of a startup (e.g., Steve Jobs — sales & marketing, Steve Wozniak — technology.)
Also, the importance of hiring is often underestimated by many entrepreneurs. The first 20 employees will be the main driving force of a startup and profoundly impact its long-term trajectory.
Hire well. Keeping mediocre people in the team is not something startups can afford.
Do you have a plan to sell your product?
Startups fail more often because of poor distribution than because they have a bad product.
Who is this product for? Where are you going to be market it? Are people willing to pay for it?
There are dozens of distribution channels. And they work differently for different types of businesses and products. For example, if your product is a mobile app for a broad market, then advertisements and media presence are great ways to drive sales. But if you are selling software for businesses, then perhaps it would be a better idea to reach out to those businesses directly.
You have to consistently experiment, measure, and ultimately define what works best for your product.
Will you dominate your market in the next 10 to 20 years?
Spending time and effort on a business that cannot sustain itself long-term is a road to frustration. Thoroughly reassess the long-term potential of your idea.
Are there any other developments in progress that can easily overrun your product in technology/costs?
Did you account for scalability? What if tomorrow you get 100 new customers? 1,000? 10,000?
The model has to be scalable and durable enough to ensure business lasts more than a decade.
Have you identified a unique opportunity overlooked by everyone else?
Creating a great business that no one else can compete with starts with discovering and building on a secret. It can be an untapped opportunity or a different way of looking at a problem. For example, Airbnb recognized and connected a supply of unoccupied lodging with travelers' demand for affordable and unique accommodations. The founders of Uber and Lyft built billion-dollar businesses by connecting people who needed rides with drivers willing to provide them. Believing in secrets (untapped potential) and looking for them enabled these entrepreneurs to see an opportunity no one else noticed.
Ask yourself a question: What valuable company hasn't been built yet?
Every moment in business happens only once. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won't make a search engine. And the next Mark Zuckerberg won't create a social network. If you are copying these guys, you aren't learning from them.
7 ingredients of a successful startup:
- Engineering: Is your technology a significant advance or only incremental improvement?
- Timing: Is this the right time to sell this technology?
- Monopoly: Are you targeting a big share of a small market?
- People: Do you have the right people on your team?
- Distribution: Do you have a plan to sell your product?
- Durability: Will you dominate your market in the next 10 to 20 years?
- Secret: Have you identified a unique opportunity overlooked by everyone else?