5 Signs Your Startup Is on the Path to Success
In the UK, 6 out of 10 startups will fail in the first three years. It’s a hard statistic to face, especially as a budding new business owner. There are endless reasons for startups not making it past the first few years, whether that’s failing to find funding or not having the right product market fit. But there are a great number of startups that do make it past the first stages and do have a good chance of success. We looked at key signs that indicate a successful future for a startup – these aren’t the only indicators, but they do set an excellent foundation. Here are five signs that your startup has the potential for success.
You have shareholders
If someone is willing to offer funding in exchange for a share in your business, it’s a good indicator that it’s gaining momentum. It puts the business in an excellent position, whereby the shareholder can offer advice, expertise, and networking opportunities. It also signifies to potential investors, customers, and competitors that your company is worth the attention. Having shareholders also provides you with the capital to expand on research and development, bring on more talented employees, and focus on marketing. While shareholders aren’t the only way to determine future success, they are a good indicator that you’re on the right track.
You’ve taken part in an accelerator programme
Accelerator programmes are an excellent way to provide startups with a wealth of knowledge, networking opportunities, connections, resources, and sometimes capital. They can even help founders find eligible business partners. Essentially, these programmes arm startups with the tools to grow and succeed. Usually, they offer the capital and resources in return for equity in the startup. It’s a huge indicator of future success, with startups that take part in accelerator programmes being 75% more valuable. And it’s proven to work: AirBnB, Revolut, and Dropbox are three of the most well-known accelerated companies. Another impressive stat tells us that 57% of UK unicorns had taken part in an accelerator programme.
You have imitators/competitors
If you’re onto something good, people will try to imitate your business. While it can be annoying, no one wants to copy failure – they want to copy something successful for a slice of it themselves. It’s a good sign and one that you can use to your advantage. Don’t let it bother you and steer you off course. Put your energy in the right place and focus on how it’s a source of healthy competition.
While competition is generally seen in a negative light, it’s one of the best drives for reaching success. It spearheads motivation and innovation, as well as creating a healthy, validated marketplace to thrive. The competition gives you an insight into changing market trends, allowing you to self-regulate. And lastly, it cultivates brand loyalty.
You have management buy-ins or buy-outs
Management buy-ins and buy-outs offer a range of opportunities. A management buy-in (MBI) is a section of the business being bought by an external group, while a management buy-out (MBO) is a section of the business being bought by the existing management team. It’s a good indicator of fast-paced beginnings and expansion on the horizon. An MBI or MBO are both excellent outcomes for founders who want an exit strategy, and usually occur when the business reaches a significant point. There are several viable exit strategies – check out our article to consider which strategy is right for your business.
You are a second-time founder
If you are a second-time founder or someone in your leadership team has first-hand startup experience, then your business is more likely to succeed. A study carried out by the National Bureau of Economic Research (NBER) investigated thousands of startups over a 25-year period. The aim of the study was to understand if serial entrepreneurs were more successful, and it found that “entrepreneurs who succeeded in prior business have a much higher chance of succeeding in the current businesses.”
Second-time founders are less likely to jump at ineffective opportunities and are more likely to be reserved. They’ve acquired the first-hand experience and knowledge that can spearhead growth and success and are typically well-equipped to navigate the lows of running a startup. And investors love second-time founders. Rajarishi Nahata from City University of New York deduced that serial entrepreneurs raise funding quicker than their inexperienced counterparts, and VCs are likely to offer better terms to founders with experience.
If you’re not a second-time founder, someone in the leadership team should be. Their direct experience with startups will offer invaluable guidance, and it makes your business more attractive to investors. A 2019 report found that a weak founding team was the single most influential factor in funding rejection.
There is no one-size-fits-all to a successful startup, and the process can be disheartening. However, the five signs discussed are good indicators that success is imminent. For unbiased, straightforward business advice, feel free to get in touch with one of our trusted and experienced team.