How of important are for you these points to run a successfull business???

[alvaranz]

Here are my marks:

1. A creative and Innovate Idea: 20%

2. Proper Founders' partners: 20%

3. Powerful Investment partners: 20%

4. A good Business plan and future vision from your market: 20%

5. A strong willpower and good and positive attitude: 20%


What is your opinion?

Regards

[BusinessAdviser]

I don't know that I would be able to assign a percentage to any of these, because each business will be different. However, relatively thinking, these are my thoughts as to each:

1. A creative and innovative idea: This is entirely dependent upon the product and the industry. For example, if your idea is based on new technology or a new system for doing something, then this number is a little low. However, if you are basing your competitive edge on doing what's already being done but doing it better, the "creative and innovative" aspect might clearly not be AS important as your way of conducting business, your customer service, your work ethic, etc.

2. Proper founders: I am not sure what you mean here. However, if you are assessing the skills and personalities of the management, this is a very low number. I would also have to pull "5. Strong willpower and good and positive attitude" into this category, as these seem to fall naturally into the "management style" or "personality" category.

3. Power investment partners: This number seems high to me. Although power investors might be able to open doors or provide mentoring and help in certain areas, they are not largely linked to the success of your company. If they are providing enough input and support to make a difference, I think they start to fall into the management team.

4. Good business plan and future vision: This, like the management team, is very low. Without a good plan, you'll never build a solid base for the company from which to grow, and without a good vision, you won't know where you're going, and thus how to get there.

5. Strong willpower and good and positive attitude: Although this would be better included in management personalities, I'll call this the "X factor." At the end of the day, this "X factor" is what will make your company succeed when it's borderline failing, or will really help it reach its potential when it is coming up short of what you think it's capable of.

If you want to know a quick and easy way to really decide what aspects of your business are most important, ask yourself this: Can we succeed without this?

For example:

Can we succeed without a creative or innovative idea? It depends on the business, as in technology the answer is no, but in lawn service the answer is yes, possibly. It all depends on the business.

Can we succeed without adequate skills and knowledge? No.

Without a powerful investment partner? Yes.

Without a good business plan and future vision? No.

Without a strong willpower and positive attitude? Possibly, but it will make life a lot more difficult, and unpleasant.

[alvaranz]

Thanks a lot for your reply Jonathan, I am completely agree with you in what doesn´t exit a strict rule to that, it depend on the kind of business....but always there is one point of them that make others be better and push other factors to be successful... this point is "strongwillpower and a proactive and possitive attitude"

Regards

[akula]

Here are my marks:

1. A creative and Innovate Idea: 20%

2. Proper Founders' partners: 20%

3. Powerful Investment partners: 20%

4. A good Business plan and future vision from your market: 20%

5. A strong willpower and good and positive attitude: 20%


What is your opinion?

Regards

great question
empirically speaking, all of these respective points have a zero (or a very low, or negative) correlation with venture success (i.e. stock outperforming nasdaq). in other words, if you take the top 20 highest nasdaq performers on any given day and test the stock price for correlation with points 1-5, you'll get a random result..some of these companies will have "A creative and Innovate Idea" and some will not; some of these companies will have "A good Business plan and future vision" and some will not etc...similarly to listed companies; with unlisted startups, luck, chance and randomness account for 100% of all startup successes and failures

in startups (as in big business), things that are outside of your control (i.e. competitors, the economy, customer preferences, legal changes, the weather, staff performance etc) have a much greater impact on the performance of your business than the things you can control (i.e. points 1-5)

the perception that entrepreneurs have of being able to significantly alter the performance of their companies is called illusion of control. the illusion causes one important problem. essentially, because venture outcomes are random in nature, the better strategy for entrepreneurs is to quickly shut down underperforming ventures and start lots of new companies (to maximise the chance of getting lucky). that's the key to success for entrepreneurs (scientifically speaking). however, because of the illusion, many (about 75%) entrepreneurs fail to quickly close down underperforming ventures because they think that if they "persist", that they will be able to "make my company a success"..which they can't do..because the fortunes of any given startup are largely outside of the control of her founders (and it doesn't help when magazines fail to advise entrepreneurs to quit their underperfoming ventures).

in these situations, the illusion of control, leads to great disillusion in results

the point: the important strength in "A strong willpower and good and positive attitude" is not the strength for persevering and staying in an underperforming venture - but the strength to quickly cut losses and move to the next opportunity. this is an extremely hard thing to do because a) you need to accept failure and b) to make new investment in the new opportunity. nonetheless, research shows that the vast majority of all millionaire and billionaire entrepreneurs follow this mantra. they start a lot of companies and eventually one of them works out...not necessarily because of points 1-5, but because of luck, chance and randomness.

[alvaranz]

I really apreciatte you reply.
Thanks a lot Akula but I am 50% agree and 50% desagree...I would like to believe all what you are telling about this question but I can´t, even I don´t believe in nasdaq sometimes... did you see what happen with the companies that believed in nasdaq in the internet bubble age...most of them went to bankrupt....

First of all I don´t belive in luck, Of course you have to see if your start up company is gonna have some opportunities to be successful in the future or not-->this is the point for the business plan and researching, before you start a company you always have to see the opportunity and do some research... this is obiously.

Furthermore You told us in your post that sometimes there are things out of your control like: "Competitors, Customer preferences, staff performance, legal changes" Are you really thinking that all these aspects are not in our control?? they are completely in our control... even it is a must to study them and do some research of these aspect to put in on your business plan and future vision strategy to be able to adapt your company in the needed time, and not mentioning the hight important point of studying your customers or potential customers preferences... it definetely depend of us.

In the third point, if you start a lot of things not only "companies" but regular things in live, you will see that you can´t focus and pay attention at all on it to put it on a successfull way. Of course you have to see if you can lead or not this idea to the success and say "no" if finally it is an idea that doesn´t fit in the market, but it is a very previous step even before to the business plan... I mean the moment to see if you are creating a successful company or not its so previous to the act of creating it... Its like if you wear a shoes in the morning and you say " I dont like how these shoes fit on my feet so I will change them" And like this you do three times per day... you only will lose time and money... you should have thought about it when you was in the shop buying these shoes...this is what I am talking about... Of course you have to say "ok, this company doesn´t fit on the market" but it is one of the first steps before creating the company... you have to think on it in the moment in which the comany concept is being created...

About the millionarie and billionarie people that create 20 companies and only one is going to be succesful... for me they are not entrepreneurs, first of all, becasue they don´t care at all about the company and the points 1-5 because they only spend the money cos they have a lot... Entrepreneurship means to take a risk, and they are not taking any risk cos they are rich so I think the study can be based on people that are not really entrepreneuers, so of course it is luck... but it is not the best example about what we understand for "entrepreneur people"

Do you know that Youtube was very nearly to go bankrupt 4 years before that it was sold for more that 30millionK?? Imagin that if its founders would have said "ok, it is not going to work out, we should stop".... They had an idea, they were creating some new, they now that You tube was gonna be one of the most important companies in the twenty-one century and now it is...

Remeber the Pasteur sentence:
"Chance favors the prepared mind", and in business would be "Chance favors the prepared Companies" Companies how did a good busines plan, companies how thought on its potencial customer preferences, companies how were created for optimistic and strong willpower people, companies how thought in the next economy important points, Companies how thought what its competitors were not doing and they could do...

All these points are under our control of course... it only depend on how of hard are you gonna work or how of smart are you able to be...

I think That entrepreneurs wouldn´t have to believe in luck ...basically because doesn´t exist.

I really apreciatte your answer and respect your opinion and nasdaq opinion, but I think that luky, chance and randomless are not the key points to run a successful company, and of course I belive that flexibility and change adaptation are two of the key aspect in the current entrepreneur people that wanna go to the success but not in the way you are displaying.

Regards

[akula]

I really apreciatte you reply.
Thanks a lot Akula but I am 50% agree and 50% desagree...I would like to believe all what you are telling about this question but I can´t, even I don´t believe in nasdaq sometimes...

HI Julio, again, thanks for raising such an interesting topic.

1. I appreciate the kinds of things you're saying, and the conclusions that you're coming to to, but they're mostly driven by confirmation bias. You want to beleive that following points 1-5 is guaranteed to make you sucessful; so you're inflating any evidence that supports this theory and discounting any evidence that undermines it.

2. For me, I don't have an inclination either way, so I'll just tell you what the facts are. The performance of startups is completely random. It's an indisputable fact. The proof is the 40 years worth of data for venture capital portfolios. In vc, a manager normally receives 1000+ business plans every year. Out of those they pick 2-10 companies (<1%) who are the best of the crop and definitely follow points 1-5. Now, guess what? By all means these companies should then succeed, but they don't. Out of those 10 companies, 8 will fail, and two will be home runs. Which ones will be the home runs? That's completely unpredictable and always a surprise. Which ones will be failures? again, a complete mystery. Totally unpredictable.

3. Be reasonable, try to overcome the confirmation bias and enjoy practicing entrepreneurship in it's scientifically correct manner. I know it's hard to live with the fact that your career as an entrepreneur is totally dependent on luck, chance and randomness, but that's just the way it is. Skill plays little part in this game. You can be the most skillful entrepreneur ever, but your ventures will still flop. Or, you can be a complete amateur kid, but your venture will skyrocket. That's just startups for you, and there is no way around it

[BOG]

Idea: 10&#37;

Marketing: 90%


I have made tons of money off ideas others came up with. I just maketed them differently. It's all in the marketing.

[alvaranz]

Thanks a lot to both for your comments Akula and BLOG.

I think the next book is "a must read book" Amazon.com: Startups That Work: Surprising Research on What Makes or Breaks a New Company: Books: Joel Kurtzman,Glenn Rifkin to understand how a startup company can go to the success, and they actually display not the same point that "nasdaq researching" is displaying.

This book is also based in a very interesting research for Joel Kurtzman and a PricewaterhouseCooper's researching team made about more than 350 companies and interviewing hundred of venture capitalist, CEO's , boards directors, and angel investors.

I think this is not a bail, luck, chance and randomlessare not the only one success key for a start up company. it is also proofed in an empirical study like the book above is displaying, furthermore I think that success is never uniform "of course" , but I keep thinking that there are plenty of aspects in our hands to put the start up in a succes way and, even so... of course 8 of 10 companies will go to the failure and only 2 of them will survive, thats completely true.

Thanks for discussing about this topic, its being so interesting.

Regards.

[akula]

nice one thanks for the link. I've had a look at the study and I like these kinds of studies. I'll avoid commenting on the various flaws of this research (i.e. the irrepresentative data set, lack of unbiased authorship and failure to discount for hindsight bias) but I'll take the liberty to share some thoughts.

I like the idea of making startups the same way as people make cakes. This thought of following a predefined recipe to achieve a predictible result has a very nice linearity to it. It's also a very practical idea, because, as a founder I have to communicate strategy to the board in the belief that predefined strategy is supposed to work..and if I didn't believe that any strategy is bound to succeed, I'm not able to endorse any kind of strategy (and then I'd lose my job!)....so, I think it's nice, practical and important to beleive that startup commercialization is a straightforward linear process, because if that's not the case I'd have to lie to myself and other stakeholders about the imminent success of what ever that we are doing.

That said...the reality of entrepreneurship, and all of it's non linear complexities, are a lot different to what I'd like to beleive..and, I guess, that's what makes things so much more fun!

[adkot]

I have no choice but to believe that the "race is not always to the swift, nor the battle always to the strong." It is proven in daily life itself.

On the other hand, as an engineer I would like to believe in a "recipe", a formula. But even after years of work, I still can't justify that this is the case.

Knowing that VCs are probably most experienced at spotting a company that is likely to succeed, I'm going to have to go Track Record being the most important.

As an engineer, we definitely look for track records of success before assigning or contracting projects, but personally, I also assess their persistance. As engineers, we fail many times before we finally get a perfect (or even working) solution. Those engineers that fail, learn, and try again, are the ones I like to work with.

Of course, no success is a red flag too.

Either way, success for an entrepreneur will mostly come from his willingness to try, fail, learn, and try again. I think persistance will be the winning factor when it is all said and done.

In recent history, I have to believe that people have succeeded without good partners, proper funding, good ideas, targeted marketing, etc. I'm sure they had to adjust as they went along, but then that comes back to the persistance thing.

Also, I'm sure it depends on how you define "success". Making 30k/yr running your own small store or some local lawn care business... or being able to retire from work all together within just a few years. Different levels of success also determines the mix of variables.

So yea, enough scattered talking...

[cre8ivejg]

I have found three key elements to be most important when evaluating a business, each of which have individual layers;
1. Your Ability to Service Debt
a. Management Strengths
b. Your Team
2. Your Ability to Repay Loans/Equity
a. Capability to Structure ROI's
b. Ability to Create Interest
3. Your Ability to Profit after doing 1 and 2
a. Sustain Growth
b. Ability to Compete

Now, of course ask 10 people the same question and you will receive 10 answers independent of one another. The ability to take from "feedback" what you can use and then apply it is rare. Those who have it usually do better than those who do not.

[alvaranz]

Thanks a lot, Akula, adkot and cre8ivegj, I really appreciate your interest in this post.

Basically my conclusion and thoughts are...
1... that the most important common point that you see in all the successful entrepreneurs are not neither good ideas, nor good partners, nor good CVs, but proper skills, like a positive and constructive attitude, strong willpower and of course know how to fail and start again... definitely this point makes the different in entrepreneur.
2...and of course you will need a good vision, business plan and all these stuffs for your business to growing up in the future and...

3...at last but not least you will have to adapt yourself from the beggining to the end(of your company and life :-)) when it is needed, because nothing work in the same way forever even in the same week... because The only one thing that stay unalterable is "the change"

Regard

[kiddoso]

Very interesting thread. Thanks, Julio, for starting this discussion.

Akula, I do have some questions for you:

You mentioned that “Skill plays little part in this game. You can be the most skillful entrepreneur ever, but your ventures will still flop. Or, you can be a complete amateur kid, but your venture will skyrocket. That's just startups for you, and there is no way around it.”

From the investors’ standpoint, how then would they decide which ventures to invest in? If what you said is true (and I am not questioning whether it’s true or not, because I don’t know what the answer is…), is it a pure numbers game for the investors? In other words, if they invest in enough start-ups, some will eventually succeed in a big way. That sounds almost counter-intuitive. We constantly hear/read investors saying: “We invest in AAA start-up because the management team has a strong track record…”, or “We invest in BBB because they capture an untapped market…”. Are these just fallacies then?

So, if the assumption is true that investors believe it’s just a numbers game, how then does an entrepreneur stand-out in the crowd in pitching his/her business plan?

[ChiTown2222]

5. Strong willpower and good and positive attitude

I'd have to say that this one should be alot higher. Failure precedes success 9 times out of 10 and its willpower and drive to perservere thats going to allow you be successful. If you let your first or even your 100th setback make you quit you'll never be truly successful in running your own business. Lessons must be learned from each one of these failures. Its willpower that seperates those that succeed and those that don't. It's willpower that will enable you to change 1 through 4 when they aren't working. I've seen so many people fail when they had all the tools at their disposal to succeed but didn't because they lacked the requisite drive.

[akula]

Akula, I do have some questions for you:

You mentioned that “Skill plays little part in this game. You can be the most skillful entrepreneur ever, but your ventures will still flop. Or, you can be a complete amateur kid, but your venture will skyrocket. That's just startups for you, and there is no way around it.”

From the investors’ standpoint, how then would they decide which ventures to invest in? If what you said is true (and I am not questioning whether it’s true or not, because I don’t know what the answer is…), is it a pure numbers game for the investors? In other words, if they invest in enough start-ups, some will eventually succeed in a big way. That sounds almost counter-intuitive. We constantly hear/read investors saying: “We invest in AAA start-up because the management team has a strong track record…”, or “We invest in BBB because they capture an untapped market…”. Are these just fallacies then?

So, if the assumption is true that investors believe it’s just a numbers game, how then does an entrepreneur stand-out in the crowd in pitching his/her business plan?

Ok, great questions.

1. Yes, it's a fact that skill has a limited role in affecting venture outcomes. After filtering the data set for selection bias, it's indisputable that age, experience and education have a low correlation with valuations in financing rounds and exit events.

2. From a vc perspective perspective, every fund manager knows that it is impossible predict which business plan in her pile of plans will succeed and which will fail. Nonetheless, she has to pick one(!!), so naturally the manager picks the plan which is the "cheapest to pick". Meaning, she picks the plan which has already been screened and approved by another investor...whether it might be another institutional investor or an angel (i.e. another entrepreneur). Because the screening has already been done for her, that's the plan that will get the immediate attention. In other words, to minimise costs, venture managers don't sit and debate "is this business likely to succeed" because they realise that it's impossible to accurately answer the question...and so the managers make decisions based on heuristics (rules of thumb) such as "who else is investing?", "do we trust these people?", "have we made money on these kinds of deals before".

3. From a marketing perspective, the kinds of things that venture managers say in their sales literature is very diffrent to what they do in their every day work. Generic statements like "We invest in A players" are not exactly fallacies, but they're not hard coded rules either. Venture managers have a fiduciary duty to their LPs; so legally, they are obliged not to invest in losers or markets where the venture has no prospects of success. The problem, of course, comes down to assessing who might or might not be a loser, which, again is done by way of heuristics.

4. To stand out from the other teams and prove to a venture manage that you are unlikely to be a loser, entrepreneurs exploit people's diffrent cognitive biases (particularly, familiarity bias). In other words, if you wanna close a funding round, the worst thing you can do it try and convince people that you have a good product, plan, etc..because all of these things are subject to randomness. However, the best thing you can do is to come through an introduction from an entrepreneur who has previously made money for the investor and, come with a kind of deal that the investor has succeeded on previously. Nothing influences business angel and venture capital decisions more than familiarity bias.

This point also ties in with point 2. It's very hard and expensive for an investor to try and predict if any given business is likely to succeed. And even if they could make that prediction, they're likely to be wrong. So, to minimise their "shit, we screwed up" risk, investors use peer filtering (i.e. investing in syndicates), where they can blame the syndicate if the investment turns sour; they also invest in deals which come through entrepreneurs they are familiar with (because again, if the deal turns sour, there's somebody to blame), and they invest in kinds of startups that have made them money before (because yet again, if the deal turns sour, the investor can blame "the market"). Having the ability to blame somebody in the event of a write down is a very important legal and psychological aspect of startup finance. It's an inescapable rule of thumb that investors won't do deals where there's no one to blame in the event of write down.

5. Another important factor in addition to familiarity bias is inside information. Venture managers spend much of their time trying to figure out the M&A requirements of serial company acquires (i.e. Google's startup shopping list). So, if you wanna close a financing round, it'll help if you have any inside information about the kinds of acquirers who are likely to buy your business..but this point is secondary to point 4, for lots of complicated reasons.

Overall, because all business plans are equally worthless from a predictability perspective, to stand-out in the crowd in pitching his/her business plan, entrepreneurs do three things; they exploit the familiarity bias of their financiers, they play to the financier's rules of thumb, and they trade in insider information.