“If you look at the statistics, you will likely become disheartened from ever launching your own startup,” says Andrew Ryan, founder and CEO of Newchip Accelerator. Newchip has helped startups raise more than $450 million to date, meaning that Ryan knows what he’s talking about. He says that it’s important for every startup founder to understand — and take advantage — of the ups and downs that come with launching a new venture.
Statistics compiled by the US Bureau of Labor Statistics (BLS) reveal that 20 percent of businesses fail within two years of launching. “Within 10 years of launching, the number climbs to 65 percent,” Ryan observes, “but it gets worse. Within the first 15 years of operation, three out of four businesses will have disappeared.”
Avoiding failure does not necessarily mean you succeeded, as Ryan explains, pointing to Startup Genome’s most recent report. This revealed that only 1.5 percent of startups produce a successful exit of $50 million or more. In other words, companies that avoid failure might become functional, but never profitable, and hardly the next Google or Salesforce. But hope springs eternal, with the number of new business formations still increasing each month in the US, on top of a record high created in 2021. Statistically, thousands will still succeed.
“If they can do it, you can do it,” says Ryan. “You just need to learn what it takes.”
Downsides
If you take care of the downside, the saying goes, the upside takes care of itself. And the most common mistake that Ryan encounters is founders running out of money.
“Lack of funding is often cited as a primary reason — if not the primary reason — that startups fail,” he says. “In fact, not having enough money is cited as the top reason that entrepreneurs choose not to start a business.” Even so, a lack of money does not discourage everyone. Some reports say that nearly 80 percent of startups launch with insufficient funds, though this often creates a recipe for failure.
Another big factor is insufficient research, including market research on both the need for a future product or service as well as the competitive landscape. “Even once you feel confident that there is a need you would be meeting, research requires that you determine how to develop, produce, package, market, and deliver the product,” Ryan points out. “Those factors will help you understand the cost and, subsequently, the price you will need to ask. From there, you need to assess if your target market is willing to pay the price.” Of course, this process can be complicated and costly — too costly for many entrepreneurs who figure that they’ll learn on the job and that their passion will pull them through the lean times.
According to Ryan, however, “Businesses need a plan in order to harness the passion.” In addition, business plans force entrepreneurs to work through the various phases of moving a business from dream to reality. They should bring clarity to the product’s concept and timeline, as well as provide a price tag for possible investors. For companies that want funding, Ryan calls a thorough business plan “non-negotiable.”
Ready, Set, Grow
Once the downsides have been addressed, focusing on several major positives is essential. Number one is finding a mentor or mentors to help a new founder learn the ropes.
“Mentors are invaluable,” Ryan says. “Steve Jobs mentored Mark Zuckerberg; Maya Angelou mentored Oprah Winfrey; Warren Buffett mentored Bill Gates, and Steven Spielberg mentored J.J. Abrams. Every founder should find someone who is farther down the road in their entrepreneurial career and spend some time with them. If they are among the one percent who succeeded, they are bound to have information you will need.”
Once a business is up and running, a founder should also be prepared to tell its story in the most compelling way. “Stories are one of the most powerful forces known to mankind,” Ryan observes. “They are tools that empower humans to organize themselves into functional societies that foster cooperation, knowledge, and friendship. In many ways, stories are the currency of life.” Growing a brand, he says, requires mastering the craft of storytelling, and founders should learn to become public speakers at the beginning of the journey. After all, Warren Buffett framed his diploma from the Dale Carnegie School of Public Speaking, but not his undergraduate degree from the University of Nebraska, or even his MBA from Columbia.
Finally, Ryan says to keep in mind that being successful demands more than a one-man show; startup founders need to build a winning team. “Identify a handful of highly skilled individuals who are qualified and capable of turning your vision into reality, as well as who are hungry enough to achieve the goal over the long term,” he advises. “Once you find them, infuse them with the culture that you want for your brand.” Furthermore, he says, get acquainted with as much information as possible and reach out to a business accelerator, like Newchip.
Timing
While starting a new venture can be both terrifying and exciting, Ryan says that the freedom and fulfillment that entrepreneurs seek when they begin their journey comes at a price. “There are long hours, tense moments, and demands that go far beyond those associated with your average 9-to-5 job,” he says. “The 99 percent who do not succeed take the risk because the rewards are substantial.”
Nevertheless, he says, if an entrepreneur’s goal is to beat the odds and become the one percent that succeeds, they should not rely on a lucky break. Rather, they must learn from both the ups and the downs. “Get the help that you need to research your idea, develop a sound business plan, and then secure the funding — and the partners — to make it happen.”
