“Smooth sailing” is not a phrase you will hear associated with launching a startup. It is a challenging process that more often than not ends with a shipwrecked business. In fact, statistics show that 9 out of 10 startups fail to reach the goal of becoming a stable, successful business.
“Launching a startup is difficult,” says Andrew Ryan, Founder of the Newchip Accelerator. “Cash is scarce, connections are hard to make, and it can feel like you are all alone in the world. The vast majority of founders fail to overcome these challenges, and the saddest part is that they fail for avoidable reasons.”
The Newchip Accelerator provides entrepreneurs with the skills and tools necessary to build, scale, and fund their startups from launch to exit. Andrew launched Newchip after acquiring over 15 years of experience in fundraising, angel investing, board of director roles, and lobbying. In the last five years, he has helped over 2,500 startups raise more than $650M in venture capital.
Thankfully, as Andrew explains, identifying the challenges that startups face is not challenging. Study after study points to a handful of issues that consistently result in startups’ failure, with a lack of funding at the top of the list. In fact, studies show that 82 percent of businesses fail due to cash flow problems. Simply said, startups that do not raise funds will fail.
Another top factor in startup failures is lack of sufficient market research. A successful launch depends on determining a strong need for a product and positioning it for success within the current market.
“Once you identify a strong need, the market research process informs how to develop, produce, package, market, and deliver the product,” Andrew explains. “Until you know these factors, you can’t know the related costs and, consequently, the price you will need to charge. This process can be complicated and costly, which means some entrepreneurs do not do it well or, sometimes, even at all.”
A bad business plan can also cause a startup to fail. Not only do business plans help founders map out a clear pathway to success, but they also play a key role in attracting investor funds.
“Obviously, an awareness of the key challenges you will face as a startup founder is important,” Andrew says, “but more important than that is making sure that you are taking advantage of the tools that can propel you past them. As I said, many founders fail for avoidable reasons. Every startup has the potential to succeed.”
So, what do the 10 percent of startups that succeed do that the 90 percent that fail do not? While making the following commitments will not serve as a guarantee for success, they do stand as hallmarks of many successful startups.
Successful startups pay attention to data
From day one, successful startups look to data to gauge their success. Long before KPIs become important, they are looking for activity — from click throughs to customer acquisition costs — that can serve as vital signs for assessing startup health.
“Data is your friend,” Andrews says. “Before you go live, it might seem like you do not have much data to track. Find some. Identify metrics that will give useful insight at all phases. Without them, you will not be able to assess success in the early stages. Ignore your data, and you could end up going in circles and throwing away money.”
Successful startups stick to timelines
Startup founders have a lot to focus on, which means it is easy to get distracted. When this happens, timelines can slip, which can be deadly for a startup.
“When startup founders start connecting with investors, timing is everything,” Andrew advises. “You must stick to a tight timeline to secure the funding necessary for establishing the foundation of your business. The future outlook and success of your business depends on this happening quickly. To give yourself a good shot at success, you should strive to raise your pre-seed round in under 90 days.”
Successful startups take advantage of accelerators
Business accelerators have been a part of the startup landscape since the early 2000s. They provide a select group of entrepreneurs with expert guidance on how to launch a successful startup. Through courses and connections, accelerators provide startup founders with access to the wisdom and experience that is critical for their ultimate success.
“Accelerators give founders invaluable tools for building a successful startup,” Andrew explains. “These include access to a network of advisors, mentors, and investors. Accelerators help entrepreneurs to develop a startup and fundraising roadmap, providing expert advice, group accountability, and an opportunity to acquire funding. Success becomes exponentially easier when startups leverage accelerators.”
Startup success does not come easy, but it is attainable. It requires a commitment to seek out the right tools, stay focused, and admit when help is needed. Those who can adopt that mindset will find themselves better equipped than most to overcome challenges and sail into the top 10 percent.
