Key Factors Behind Startup Success
The popular belief is that most startups last three years – just like love in Beigbeder’s novel. In this article, we’ll explore the startup scene and factors contributing to startup survival or failure and focus on a real-life case study of Whales’ collaboration with Scrabit.
The Startup Landscape
Startups challenge the rules of today’s dynamic business landscape. In industries marked by rapid change, their agility lets them pivot. Overall, startups’ contributions to innovation, job creation, and economic growth are essential for continued progress.
Globally, 305 million startups sprout yearly. FinTech, Life sciences & Healthcare, and AI represent the industries with the biggest startup activity – 7.6%, 6.8%, and 5% of all startups, respectively.
But not all startups are destined to make it. Here’s the risky reality:
Failed startups account for 90% of all startups, according to Failory.
- According to the rule, you are no longer a startup if your revenue exceeds $50 million, you have 100 or more employees on board, and the enterprise is valued at $500 million or more. This usually takes at least 5 years to reach, if not more.
- The average life expectancy of a startup is 4-5 years before it goes down or is acquired by another company for its valuable assets.
- Generally speaking, a successful startup will take 3-4 years to start bringing profits.
Understanding Startup Failures
Every startup owner knows there are going to be obstacles from the onset. Still, some of these catch entrepreneurs by surprise, either because there are not enough resources to address the obstacles or simply because they weren’t expected.
Here are the common challenges startups encounter during their formative stages.
A misconception shared by new entrepreneurs is that once you get yourself out there with your idea, a VC will fund it generously, and you’re all good. The bitter truth is you must have sufficient pre-funding capital. Without it, the startup won’t be able to pay bills, make loan payments, or handle other financial obligations. This is a huge red flag for investors.
You’d have to start with your own money, create a prototype, do the research, and survive the time until your first fundraising attempt. The timing of the pitch, the data detailedness, and the pitch deck value affect the amount of venture funding for startups the most.
Fundraising takes multiple rounds: you raise just enough money to reach the next milestone. Every 12 to 18 months, there’s another round and an opportunity to attract new investors. Later and larger rounds (Series B or C) take around 15 to 20 months between bringing in new capital, so you’ll have to work to stay afloat this whole time.
Then, there are cash flow issues no one’s immune from. When the outgoing cash exceeds the incoming cash, processes like product development & roll-out, hiring, marketing, and office management get delayed.
Solution: Have your finances planned out before you start. Assume that your success depends on the initial investment rather than snappy funding.
Startup Business Plan
It’s surprising how many startups soft-pedal planning or ignore it altogether. Short-term and long-term represent the core that carries startups through their early stages. They should reflect where you expect the business to be in months and years and include areas like sales, development, marketing, staffing, skills shortage, and funding.
Solution: Set measurable goals and deadlines. Allocate the limited resources: time, money, and manpower. Identify potential risks and challenges and plan for the unexpected. Research and understand the target market, customer needs, preferences & trends, and market gaps you can capitalize on. Plan for growth, scaling, and maintaining profitability in the future.
Lack of Customer Orientation
A lot of entrepreneurs start their businesses wanting to change others’ lives for the better. As tasks pile up, many fall into the trap of prioritizing money-making over the real reason for doing what they do. But losing the connection with customers is a sure path to failure.
Solution: Monitor the trends and shifting customer values. Ask customers if they’re happy with your company’s offers. Contemplate the demand for new features and pay close attention to customer responses.
Today, you’re a discovery everyone wants to know more about. Tomorrow, another fresh company gets all the attention. That’s a widespread occurrence in a dynamic and crowded startup landscape. Failure to adapt to the changeable industry nature and a weak understanding of the product’s uniqueness fails many newcomers. Another common mistake is reshaping the brand/product because of the competition instead of banking on your own uniqueness.
Solution: Define what differentiates your product/service from the competition and why customers should choose you. Discover what the competition does better than you and what makes you unique like no competitor is. Have a solid understanding of your brand’s values and mission.
Startup Success: Real-Life Cases
Experience of other startups that succeeded despite setbacks may inspire you in your business pursuit. Let’s break down a few real-life examples of startups that made it to the top.
Upvoty is a user feedback tool founded by Mike Slaats over 4 years ago. Mike is a single founder with over 10 years of entrepreneurial experience. When launching Upvoty, Mike didn’t work with a VC or receive any external money. He financed everything with the profits of his main startup, Vindy, a home improvement platform that brings in around $1,000,000 a year.
As Vindy surpassed 8,000 users, the amount of feedback quickly grew too. He required a way to collect and manage this feedback, and after research, he found an opportunity to build a better user feedback tool. That’s how Upvoty was created. As of now, Upvoty is a fully remote team with 4 people on board and a monthly revenue of $25,000.
GooRoo is a monthly subscription platform with tutors providing educational guidance on everything from basic reading and writing skills to college admission essays. With more than 1,000 tutors in NYC alone, GooRoo keeps growing. Scott Lee founded his first startup, Peertutor, in South Korea while still in high school. Since then, he’s founded an online clothing retailer, worked for JPMorgan, and served as an advisor for the 2018 Pyeongchang Olympics. Afterward, he founded GooRoo to cater to every student’s unique needs while bringing the excitement of learning to the world.
GooRoo’s success is defined by Lee’s patience, resilience, and ability to adjust to changing market conditions. As Scott stated, his experience serving in the Korean army shaped him into an entrepreneur.
Startup Partnership: Whales & Scrabit
At Whales, we’re driven by supporting startups during their early stages. Whales are not limited to digital marketing, consulting, and software solutions – we provide venture funding for startups that need a boost.
Want to find out how we collaborated with a startup?
Here’s a case: Scrabit, a platform that helps car owners sell their used vehicles. With Scrabit, drivers can sell their junk cars for recycling and reprocessing or donate them to volunteers and organizations – all for a good amount of money. Businesses and buyers, on the other hand, can purchase a variety of used cars at a fair rate.
Scrabit’s founders’ passion for automobiles goes a long way back. Since childhood, both have been interested in finding ways to boost vehicle performance and make car ownership sustainable. After working for several companies in the automobile and financial sectors, the founders created Scrabit.
Scrabit’s approach is the definition of a stress-free user experience. It takes a day tops to answer a few questions about the vehicle, arrange the pick-up, and get your car ready for towing. Scrabit’s fastest pick-up was only 15 minutes!
Task: Scrabit required initial funding to launch its platform digitally. Besides, everything from a marketing strategy and content to custom website development, brand support, and social media management had to be done from scratch.
Solution: As a financial and marketing partner, Whales provided initial funding to Scrabit and also took over its marketing strategy and branding. Scrabit’s main challenge was effectively conveying how fast and convenient their service was as opposed to most of their competitors. So, Whales placed this message at the core of Scrabit’s branding strategy and communicated it through the platform’s UX/UI design. Whales also developed a robust social media strategy and website content to engage potential customers and educate audiences on everything car-related.
Startup Lessons Learned
A few things stood out the most during our collaboration with Scrabit. Here are some insights and best practices we gathered:
Your brand’s unique value makes (or breaks) the success. Scrabit’s advantage was that its niche competitors lacked a single platform combining everything: junk car sale & purchasing, towing, charity partnerships, and more. Another strong point is Scrabit’s speed of service.
Have a detailed plan before seeking funding. When Scrabit approached us, they already had their vision planned out for the long term. Everything from sales, development, marketing, staffing, and finance was included in the plan. Scrabit also didn’t miss a thing concerning resource allocation and potential risks.
Know your audience. Having spent years working in car sales and reprocessing, Scrabit’s founders clearly understood who their customers were. With this in mind, developing a solid marketing strategy and branding was easy.
The first three years of entrepreneurship can be filled with unforeseen challenges. Startups that weather the storm with determination, utilize agility when needed, and tap into the resources and mentorship available stand a far greater chance of survival.
Collaboration between Whales Ventures and Scrabit is just one example. Our overarching goal is to equip startups with valuable resources and strategies and help them chart a course toward success in the competitive environment. It’s not about just surviving – it’s about thriving.
Ready to make your startup a success story?Contact Us