Startup Ethics

5 mins read

Startups are a prevalent topic, as it has become more accessible than ever for inspired entrepreneurs to start their own businesses. However, there are many misunderstandings in terms of what makes the foundation of a promising startup or the measurement of the probability of startup success. In the past, I always believed that startup success is due to factors that are actually in the end, not as critical as one would initially think. These are common errors and something that is often only learnable through personal failure.

There are a few factors that are very important for startup success. It is possible to be successful without these traits, but the probability becomes significantly lower. You can ask VCs and investors the same questions and generally speaking, they all come to a very similar conclusion, albeit through different experiences. All roads lead to Rome, as they say.

Here, we define startup success as a financially viable model that allows the business to be self-sustainable or draw enough interest such that investors are interested despite a negative revenue stream. There are, of course, non-profits that can also be successful but they still do need to see revenue to pay their staff.

  1. The ability of the founders.

In the founders’ case, it is essential that they have the fundamental ability to carry out the said project. It is often that founders overestimate their own ability due to a lack of experience or underestimate how challenging the project is. In reality, the vast majority of people do not possess the right personality or traits successfully manage a startup. This is a reality that most are oblivious to, unfortunately.

  1. Persistence and consistency.

Persistence and consistency are two fundamental traits that are echoed across VCs meetings. It will likely take a large number of years before startups will be profitable, if ever. Most will quit very quickly when things do not go their way, or the outcome is not to their liking.

In 2019, the failure rate of startups was around 90%. Research concludes 21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year. This, cumulatively speaking, is very high. In addition, this is research done on companies that have been registered, so the real numbers are likely much, much higher. Startups, despite their name are a long game. One must stay focused and be consistently high performing for a long time to have a high chance of succeeding.

  1. Execution and result-driven.

Execution is defined as the type of person who will go through with their actions and is results-driven. If they say something, they will not only do it, but do it extremely well and quickly. Most people will claim to have a plan, but in reality do not actually deliver. To know whether or not you are a person that is action-orientated, just ask yourself what have you accomplished consistently over a long period of time?

  1. Extreme internal motivation.

How motivated the individual is, is extremely important. Things will go wrong all the time in startups as it is an unpredictable environment. Always being motivated, and consistently motivated regardless of the circumstances increases the success of business tremendously. Often, irrationally so. This does not mean being unreasonable even when the odds are against you, but keeping your eyes on the goal rather than be distracted is very important.

As a side point, notice that the idea is not on the list? Actually, this is not just my opinion, but spoken about by a large number of VCs. Teams can pivot, making ideas not as important as people think it is. Yes, ideas are important, but it is not the deciding factor if a team will succeed in the long term.