According to Fortune, nine out of ten start-ups fail. Cold statistics like these are not intended to discourage entrepreneurs, but to encourage them to work smarter and harder.
If you ask the experts why start-ups fall short, you might hear about “horses” (that is, the opportunities start-ups are targeting) and “jockeys” (the founders). Both are important, but if forced to choose, most VCs would favour an able founder over an attractive opportunity. Consequently, when asked to explain why a promising new venture eventually stumbled, most are inclined to cite the inadequacies of its founders—in particular, their lack of grit, industry acumen, or leadership ability.
But putting the blame on the founders oversimplifies a complex situation.
According to CB Insights there are many reasons why new businesses fail:
- 38% failed because they ran out of cash or failed to raise new capital.
- 20% failed because they were outcompeted.
- 14% failed because they didn’t have the right team.
A great “jockey” isn’t even necessary for start-up success. Other members of the senior management team can compensate for a founder’s shortcomings, and seasoned investors and advisers can likewise provide guidance and useful connections. A new venture pursuing an amazing opportunity will typically attract such contributors—even if its founder doesn’t walk on water.
It sounds obvious, but one of the main reasons startups fail is that they make products no one wants. Indeed 42% of companies surveyed by CB Insights identified the “lack of a market need for their product” as the single biggest reason for their failure.
Successful start-ups do also have many common characteristics, and the same can be applied to environmental and renewable energy breakthroughs.
Last year, the renewable energy market in Europe grew by 57.3 GW and this trajectory is expected to continue through to 2050 as nations strive towards net zero targets. So, there’s no doubt that a buoyant market exists for those who have technology, products and services that support this ambition.
And we do know that when the product is perfect for the market, you’ve got a real head start.
But running a business involves far more than just being excellent at what you do to generate profits. Too many people underestimate the extra hours and commitment required to run the business correctly. At the end of a long day how many people are excited to do the books?
The “under the bonnet” tasks can easily be overlooked as the mundane aspects of business process, particularly when things are moving fast.
Growth — fast growth — is what entrepreneurs crave, investors need, and markets want. Rapid growth is the sign of a great idea in a hot market. Rapid growth early on is a sure sign of future success.
Even though there’s a lot of luck involved in success stories like Octopus and OVO Energy, there are more humble reasons why other startups succeed. They have a product that meets a need, they don’t ignore anything, they grow fast, and they recover from the hard-knock startup life.
Much like an egg incubator, a business incubator and accelerator will help to create the optimal environment for growth.
Incubators often have a proven track record of creating companies that have made it big, which makes it easier for a partner, angel investor or potential client to take a chance on you. And there are many benefits to working with an incubator or accelerator.
Companies need an “innovation environment” to ideate and evaluate possible solutions to business challenges. An incubator or business accelerator provides the opportunity for a business to test ideas from the inside and evaluate possible solutions that exist in the market—all in a safe environment designed exclusively for this purpose.
Tap in to the vast network of support helping to establish connections with professionals who will source capital, funding, and grants, provide financial guidance, governance and technical assistance such as legal and regulatory compliance, as well as branding, marketing and PR.
Founders can often struggle to take off their rose-tinted glasses when it comes to thinking critically about their solutions and develop serious tunnel vision. Strong mentors can make a world of difference by providing expert advice. Access to these kinds of people, as well as education and learning, is a key benefit that can save from failure, as well as the extended network that can support with talent acquisition.
The important part about accelerators is that you will generally only get out of them what you put in. Hard work is still required for the pathway to success.
Accelerator programs and other forms of network expansion tools help immensely on two fronts: ideation enhancement and validity. Being in the same space as other like-minded individuals broadens your view and encourages you to see things from a different perspective.
With such rich access to resources, there is greater access to industry insights and strategies can be refined, effectively boosting the transition from a fledgling startup to a robust, sustainable business that will really support the net-zero agenda.
If you’re working in a very niche space where it’s all about who you know, an industry-specific incubator may be able to open new doors. It only takes one warm intro to lead to a pilot opportunity, strategic partnership, or investment.
Bearing all this in mind, at 350 we believe we can tip to scales in favour of the start-up.
Principally and simplistically, there are three drivers for long-term success; management, management, and management. And three drivers for short-term success; increases in aggregate demand for the product and services provided by the start-up.
If we can then amalgamate these pursuits, into a single unit and add our team of seven into the mix, to handle all the business disciplines that the engineers or project developments or combinations thereof either don’t want to handle or aren’t particularly skilled at. Thus, by filling capability gaps, we may have success on our hands.
We parachute into the start-up and work as part of their team. We term this our “Marine Corp” strategy.
Our formula would now appear to be bearing fruit, though it is never a straightforward process. There is nothing as stressful as running the entrepreneurial gauntlet; the dangers are many and the opportunities few.