Three Things Successful Startups Have in Common
Startups are exciting. Every day, an energized and passionate entrepreneur emerges who’s got the agility, intelligence and know-how to realize an innovative and never-been-done before solution to deliver on unmet needs. If we build it, they will come, right?
Well, no. Not even usually. In fact, startups fail 90% of the time. And the number one reason (42%) cited by startups for their market failure, according to Fortune Magazine1, is lack of need for their product.
This, in some cases, may indisputably mean the offerings just weren’t unique, innovative or good solutions to the unmet need. But in a lot of cases – too many cases – it actually means there was some very real disconnect between aspiration and business success.
Here’s the rub: most startups fail because they don’t heed the old adage — don’t put the cart before the horse.
So what’s the secret to launching a successful startup? In my 30+ years of experience, I’ve witnessed these three scenarios:
1. The successful entrepreneur understands that only Mother Courage pulled her own cart (and she sacrificed her children in doing so).
Have you ever noticed how often startups seem to be started by individuals rather than large groups? They’re founder-centric2, and often a natural reflection of the CEO, who drives the organization with passion, energy and vision.
These entrepreneurs also tend to be intensely product focused. They are driven daily by functionality requirements and a singular vision to create and successfully realize their product.
But it’s hard to push your cart alone; and all the passion, agility and intelligence that comes with being a talented visionary doesn’t mean a CEO can wear all the hats necessary to run a business successfully for very long.
This is especially true when it comes to marketing: most startup CEO’s simply don’t have the experience or the bandwidth to effect efficient results. Their expertise is primarily consumed by the product itself; and their attention to and, more importantly, their investment in marketing as a part of their overall strategy is often compromised by the same founder-centric culture that attempts to drive product success.
2. Successful startups recruit the right team of horses.
The most successful startups invest in human capital for building its brand and developing its marketing. A lot of failed startup companies had a great product. But they probably didn’t understand how to harness the right horses to pull it to market.
In the same Fortune study, failed startups admit to “getting outcompeted” and cite “poor marketing” as two of the top 10 reasons for their business’s failure2.
In addition, in a current study of 2,200 international marketing leaders3, over two thirds believe senior management don’t fully understand the role, value, or potential that marketing represents.
And another recent study of marketing managers by the Economist Intelligence Unit noted “their contributions to the business are often lightly regarded by their colleagues on the executive team.”
Organizations that are structured for success include a strong marketing and brand leader who is part of the leadership team. They are respected thought leaders with an expertise in leveraging the power of communicating in a digital world. They are entrusted to plan, execute and deliver on established, measurable goals and objectives.
3. Successful startups put their money on marketing.
Allocating the right financial resources to marketing shows an understanding that an early declaration of the organization’s brand helps to build equity and awareness with investors, stakeholders, employees, partners and customers.
David Cummings, a leading entrepreneurship consultant, wrote in a recent article on startups: “I’ve talked to plenty of entrepreneurs who raised angel money ($100k – $1m), spent 90% of the money building the product of their dreams, and realized too late that it costs serious money to acquire customers.”4
His suggested financial model, although focused primarily in B2B technology, is a 3:1 ratio cost model for customer acquisition (sales and marketing) relative to engineering (software development, architecture, quality assurance, etc.). He suggests a typical software company budget, might look like this:
- 60% – customer acquisition (sales and marketing)
- 20% – software development/engineering
- 20% – general and administrative
Bob Epner, Founder & CEO of ChiefofStaff.com, LLC, shared that, “I am convinced a key process for any startup is how you keep distilling your message about ‘what your company is,’ ‘why did you start it,’ and ‘what is its unique benefit.’ It can be a daunting task to keep fine tuning this message and testing it with clients, partners and investors, but that is why it is so important to allocate resources early on for branding and marketing, and to work with great outside professionals in this field. Otherwise you can end up either spinning your wheels internally among your team, or overreacting to every bit of outside feedback you receive. Even though our budget is tight, we are so fortunate to have invested in branding and marketing early in our evolution. We have made rapid progress in our brand messaging and marketing, and have a good process in place to continue to refine and adapt as our business grows. Overtime I believe our brand and market positioning will become our most prized asset.”
Inattention to marketing to drive products to the marketplace is almost by definition a recipe for failure. Unsuccessful startups classically don’t have the marketing expertise and experience in customer acquisition to compete. They don’t have the skill set to develop a clear articulation of their brand and its marketplace differentiation. And they don’t have the mechanisms to deliver a compelling message across the broad spectrum of media necessary to communicate today.
The advantage for entrepreneurs driving a cart with a highly skilled team, poised to take their product to market: they don’t try to push it alone; and they understand that products don’t drive themselves – they need help.
You want your exciting startup to succeed? Build your strategy around being pulled by the right team of horses from the outset.