Tuesday, August 6, 2013

How Long Should It Take For a Startup to Succeed?

startup-successEvery startup founder knows implicitly that startup success is a long hard road. Yet we always dream that we are the exception to the rule. So once in a while it’s good to look at some facts to temper our imagination.

I was reading an old article written by marketing guru Seth Godin a while back where he mentions that “it takes about six years of hard work to become an overnight success”. Based on a small sample of household names from Bill Gates to Mark Zuckerberg, he is an optimist. Here is some data from Wikipedia:

  • Microsoft – Bill Gates founded Microsoft in 1975, to develop and sell BASIC interpreters for the Altair 8800. Six years later, he managed to land a contract with IBM to provide their IBM PC base operating system. Even still, it was another five years before Microsoft went public in 1986, making him an overnight success worth $350 million.
  • Apple - It took Steve Jobs two decades to become an overnight dot-com billionaire. Established in Cupertino, California in 1976, Apple really didn’t get on the map until the advent of the Macintosh in 1984, eight years later. Even then, it struggled through the 80’s and 90’s, until the advent of the iMac and consumer products.
  • Yahoo! - This company was founded by Jerry Yang and David Filo in January 1994. In April, 1996, Yahoo! had its initial public offering, raising $33.8 million, by selling 2.6 million shares at $13 each. Amazon.com and Yahoo! are the benchmarks in the industry for overnight success, but still required two to three years to really get going.
  • Google - Larry Page and Sergey Brin started working on Google in 1996 – but three years later in 1999, few people had even heard of it yet. But add another five years, and Google had made it, going public in 2004 with a market capitalization of $23B.
  • Facebook - Mark Zuckerberg, while attending Harvard as a sophomore, concocted “Facemash” in 2003 to get a lost girlfriend off his mind. He later changed the name to Facebook. In 2005, Facebook still showed a yearly net loss of $3.63 million. But within five years it became an overnight success, and now has about 400 million users worldwide.
  • Amazon.com - Jeff Bezos founded Amazon.com in 1994 and took it public three years later, making him a multibillionaire. Amazon's initial business plan was unusual: the company did not expect a profit for four to five years; the strategy was actually more effective than his business plan predicted. Very rare case.

Take heed. These examples are generally recognized as the fastest growing companies in recent times, so your odds of matching their speed are not good. Investors will always look askance these days at a business plan which projects Amazon.com results.

With most businesses you rarely hear about the months and years of hard work behind the scenes. You rarely hear about the major catastrophes followed by major miracles that brought the businesses back from the brink. You rarely hear about the owners who took out second mortgages to make payroll or to hire a salesperson.

If you don’t have realistic expectations, you can quickly get into the wrong state of mind. You’ll be thinking that to be a success your business has to make you a billionaire in three years. Then you’ll give up way too soon.

This notion of overnight success is an urban legend, and very misleading. If you're starting something new, expect a long and challenging journey. But that's no excuse to move slowly. Many entrepreneurs think they are running, but find themselves falling farther and farther behind a rapidly moving target. Time passes quickly in this mode.

Marty Zwilling


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4 comments:

  1. It's all about the hard work, perseverance and dedication! :D

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  2. These successful stories motivate us to start something new and extra ordinary ideas. Now these 6 sites of online businesses are pioneers and monsters of online business and earning billions. So there is more need to start work on new ideas rather then to cheese old concepts.

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  3. interesting piece to read, giving every subject enlightenment for us to gain knowledge but at the end i have to say it's all about hard work as well as luck San Antonio Personal Injury Lawyer

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  4. A dose of realism. And we startups often think angel investors will "save" us for a while, breathe a little. Still, we must engage, engage, engage. Thanks for this concise reminder, Marty.

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