Previously I’ve posted about the top reasons startups fail, according to Bill Gross of Idealab. According to his research the most important reason is timing. But today’s post is the mirror image, what is the key factor in making your startup a success?
The secret to creating a successful startup is your contacts book, A big data analysis of 42,000 startups has found there’s one key thing that encourages growth according to the article on Wired by Chris Stokel-Walker.
Moreno Bonaventura and his colleagues at Queen Mary University of London analyzed 41,830 companies across 117 different countries over the course of 25 years, from 1990 to 2015. They defined success as achieving an exit either going public (IPO) or being acquired by another company. The key success factor was the network of the founders and they staff they hired. This isn’t surprising as the vast majority of VCs I’ve met with rank the team as the most important factor in their decision on whether or not to invest in a startup. They would prefer an “A” team with a “B” idea to a “B” team with an “A” idea. The “A” players will either make a success of the “B” idea or pivot to a better idea; the “B” team will more than likely fail to execute on the “A” idea.
But simply amassing a bunch of Facebook friends or connections on LinkedIn is not sufficient. People at the very top of the rankings may not have the time to help you. And the first rule of business development is nurture valuable contacts by helping them whenever possible. Bonaventura concluded that the more connections a person has means there’s a greater “opportunity and knowledge” that can be gained. I would go beyond that to the quality of those connections. Simply having a lot of connections isn’t enough, they need to be in the market you are targeting. A great resource for the founders I mentor at MIT is the MIT alumni directory, which enables searching by type of business. I assume most universities have alumni directories of their own.
“A person that ranks higher is a person that doesn’t just know many contacts, but has connections that allows them in a few hops to reach something that’s needed in a work environment,” says Bonaventura.
Valeries Ciotti, who works with Bonaventura adds that “it’s best to hire people who have quite a wide variety of knowledge, with connections from different companies.” Beware of monocultures. While it can be tempting to hire solely from your alma mater or your last employer, you risk running into a kind of groupthink that can be eliminated by hiring from diverse companies and even markets. Studies have shown that diverse groups – those having men and women, majorities and minorities – make better decisions than all male, all white groups.
And I have to add a maxim of I borrowed some time ago: It’s not who you know, but who knows you. As an individual you may know hundreds of people, but through media relations or social media marketing you can become known by thousands or even hundreds of thousands, thus opening up your venture to opportunities that come in “over the transom.” Or as a former partner of mine once said, back in the age of business phone systems and landlines, “We’ll know we are successful when the number of
in-bound calls starts exceeding the number of our outbound calls.”