Thousands of new startup companies emerge every year. However, most of them go bankrupt in the first year, unable to grow and reach higher levels.
Yet, among these startups, there are those that can face challenges, grow, and develop into successful ventures. Among successful startups, there are differentiating factors — their characteristics.
Here are seven characteristics of successful startups:
- Product Alignment with the Market
Selling products or services that customers desire is crucial. The market must be willing and able to pay for the products offered by the startup. While it may seem trivial, many startups struggle to create products that align with market needs.
According to CBI Insights, 42% of startups that failed in a survey attributed their failure to the inability to adapt to market needs. Even though these companies conducted market research before launching their products, the research might not have covered a broad enough market scope, leading to an inaccurate understanding. Successful startups know that the initial product idea needs continuous refinement before an official launch. The faster a startup finds the right formula for a market-aligned product, the stronger its foundation for success.
- Start with Small-Scale Market Testing
Startups might be tempted to create products useful for a broad target market. Unfortunately, just because a product or service appeals to many people doesn’t mean the desire to provide it should be followed.
This can be risky for new startups. One of PayPal’s founders and early Facebook investor, Peter Thiel, revealed that the biggest mistake a new startup can make is targeting a giant market from the start. This indicates that the startup hasn’t been able to define the market category correctly. In the end, startups will face too much competition.
When a company creates a product for a large market segment, it won’t be able to grow into a large company. Thus, it’s better to start small to perfect processes and eventually achieve goals.
An example of a startup that started with a small market is Facebook. Mark Zuckerberg launched the site at Harvard, followed by several other Ivy League universities. Later, the platform became accessible to anyone in the country with a .edu email address. Long before Facebook dominated the world, the company continued to innovate.
- Disruptive Spirit
Disruption is innovation that can create a new market, ultimately replacing existing markets. Successful startups are based on disruptive ideas. The phrase “disruptive technology” was coined by Harvard Business School professor Clayton Christensen.
Therefore, the driving factor for startup success isn’t the founder or individuals wanting to be their own bosses, but the spirit or idea visualizing a “new normal” for their target market. That passion propels startups forward to face existing competitors, industry standards, and norms.
- Fun Company Culture
In the first two years of a company’s existence, 50-60% of its employees are likely to resign. Usually, this happens due to poor management.
Culture is essentially a set of beliefs held by a community. Therefore, company culture fundamentally consists of assumptions held by management about how (and why) work is done. This includes:
- Who are we as a business and as individuals?
- What do we believe in?
- How close should we be with our colleagues?
Answers to these questions ultimately determine a startup’s culture. The pressure to accelerate product development and customer acquisition often leads many founders to overlook culture.
Establishing a strong culture begins with clarifying company values and then injecting these values into everything from office policies to the work environment. Thus, many founders choose coworking spaces over conventional offices to build a sense of community.
- Seriously Accepting Feedback
One quality of successful startups is their ability to accept feedback. Whether it comes from investors, mentors, or customers, successful startups leverage the value of feedback to improve their products, services, or business models.
Ultimately, it’s essential for startups to know when to change and when to hold a particular position. Smart founders build good relationships with mentors early on, developing connections with those who have more experience in the field to learn from their mistakes and successes.
One of the best ways to make such connections is through coworking. Opening an office in a tech-focused workspace connects workers or founders with individuals who understand the challenges startups face. In other words, finding like-minded partners.
- Focus
When starting a startup from scratch, especially with a small team, founders are easily tempted to take on too many projects at once. Unfortunately, this can kill a startup.
As written by one of the founders of Y Combinator, Paul Graham, “Although the immediate cause of death in a startup tends to be running out of money, the underlying cause is usually lack of focus.”
One startup that successfully stayed focused is BlaBlaCar. Unlike Uber, this French startup caters to a more specific transportation need: carpooling for long-distance travel. BlaBlaCar connects drivers with others traveling in the same direction, like modern-day hitchhiking.
By focusing on a specific niche, this startup managed to raise $100 million in funding in 2014 and has now expanded to reach 20 million users in 18 different countries. By staying focused on their target audience and product, the company can clearly communicate what makes them unique to investors.
- Building a Community
Lastly, the most successful startups think about things beyond customer acquisition and work to build a community. They can’t rely on decades of brand loyalty like established brands, so they work hard and engage with the target market.
Today, many forums can be used to build communities. Social media platforms, online forums, and messaging apps like Slack are examples. However, in the early stages of community building, it’s usually more challenging because it starts with the question: how do we make people interested?
The key is to know what is most valuable to the market and facilitate conversations around those topics.
These are some characteristics of successful startups. Beyond these characteristics, many other factors contribute to startup success. However, founders can gain insights from the mentioned characteristics and apply them to their startups.
