20 Nov 2022| ONPASSIVE
Do founders Play a Significant Role in the Success of Startups?
According to the research, got to know that the startup founders may not impact the success of startups instead, where venture capitalists have previously thought. According to the recent article, it stated that “In venture capital, the strength of a startup’s founder and leadership team is considered the most important factor when deciding whether or not to back it. A new study, however, casts doubt on how much the founder matters – at least in the early stages.”
Based on my identification in my three decades of practicing venture capital law, venture capitalists stated that early-stage companies’ investment would be based on a similar mantra as the familiar one for real estate investing based on the location, whereas venture capital was on management.
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So many startup companies start with a business strategy that changes according to time. The pivot is the well-known business strategy for early-stage startups until the product or market fir gets further defined.
These pivots have been dependent on a robust, flexible management team. How do the attributes of founders not impact startup success? I think in-depth research should be done on this.
Why do some startups succeed, and some fail?
Research has conducted to know why some startups succeeded, and some failed. Company leaders also took part in this research and stated that there are four main reasons for failure. The research helped me to clarify my doubts. The reasons for failure are:
Reasons for Failure:
In another research, I got the top 20 reasons for failure. The main focus was on the company level. Each reason is due to a failure of leadership at some level. The top 9 reasons are:
All these issues are related to the business and team and also related to the product. There will be issues related to the leadership and the leader’s ability always to build a strong team and drive a business model and business thought process and discipline. Also, the lack of money is one of the reasons for failure.
Now coming to success, I have researched and got to know that some serial entrepreneurs who have prior success are more likely to have success. And the best VCs can pick serial entrepreneurs.
I found some best reasons for success from the Ecommerce Genome by compass in their Startup Genome report. The research was done on 650 internet startups. The research is on the tech-specific, and still, I believe that it is very instructive. The report contains 14 indicators for success. Those 14 factors for success are:
Reasons for Success:
Looking at both the reasons for failure and success, concluded that commitment is the key factor. It doesn’t mean that you are inflexible; you can stay with the course. It is the reason for many successful companies who are having one or two pivots.
Next, I believe that mentorship is an important one. It doesn’t mean that you are willing to seek a mentor; if you are willing to learn, listen to their guidance. I’m not telling that you should follow every advice or guidance given by your mentors. But you will have a significant domain, technical, or business expertise if you select strong mentors.
At least consider what they say. So, it is essential to establish and implement all the fundamental business principles and practices to improve your success rate. Many technical founders love their product ideas and believe that the world will create a path to their career if they build a better mousetrap.
Hence, both failure and success studies indicate that you need leadership in the company with the knowledge related to general and domain-specific business. Also, you should make sure that you have strong technical expertise in your chosen product development area.
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