March 13th, 2019 | By: Wil Schroter | Tags: Strategy
“Did you hear about XYZ.com? I just read about them yesterday. They raised a $5 million round from a top tier venture firm at a crazy valuation. It’s like they popped up overnight!”
Ah, the familiar refrain of “instant success.” The press loves you, investors love you, everyone wants to high five you and join your mission. You’re on your way to becoming the next Google, right?
Well, unless in that same minuscule time period you’ve managed to build a profitable business with a sustainable customer base and cornered your market, you haven’t proven anything.
Success doesn’t come instantly, and it sure as heck doesn’t come from big announcements. It comes from a long term dedication toward building something real.
Launching Isn’t Success
Launching a product is an important part of the startup game, but no matter how well received your launch is (or isn’t) it’s only one day of many to come. It’s always great if your customers love and use your product. But again, that’s just one day.
People don’t get medals for starting races, they get medals for finishing them.
Look at your big launch as a nice start, but only one step in the larger race. Companies don’t magically become successful from launches, it’s what they do after the launch (and years upon years after that). If you need proof take a look at the launches (and subsequent crashes) of Airtime, Color, or Wesabe.
Funding Isn’t Success
Many people in startup culture believe that getting funded doesn’t always guarantee success, but not getting funded can guarantee failure. (But that’s only true if there is absolutely no way to get your company launched without funding. For most startups, funding still comes from personal funds, credit cards, crowdfunding, and long hours from the founders.)
Getting a big funding round, no matter what the valuation or the source, doesn’t guarantee any outcome. It’s a crutch toward building, but the team still has to prove that it can build something of value.
Even successive funding rounds only guarantee one thing: that a whole lot of people will need to be paid back some day.
Valuations Aren’t Success
Even if you are fortunate enough to find an investor crazy enough to back your idea, getting an insane valuation proves nothing other than their willingness to take less equity to be in the deal.
A valuation is just a speculative number. It’s rarely based on real revenues or proven history. The fact that some Ivy League graduate has convinced himself that your company will be worth a billion dollars doesn’t mean you’ve actually done anything. You still have to build a billion dollar company like everyone else, one customer at a time. Speculation doesn’t buy you anything.
Press Coverage Isn’t Success
Getting great press coverage can drive some customer attention your way, for a short period of time. The press isn’t likely to cover your startup daily for the rest of your company’s growth, so those great articles you see today are a only a blip in your marketing plan. You need sustainable outreach to build a real business.
It’s easy to get coverage with a new concept, because you’ve got the benefit of not having to prove your idea with real customers and revenue yet. Novelty, much like pixie dust, wears off very quickly. A year from now no one will care about your startup unless you’re doing the thing that every good company does well: getting real customers.
Success Takes Time
If you want an indication of whether companies can achieve instant, lasting success, look back two years at the hot companies that were launched, funded, or making headlines. It’s like listening to pop music from two years ago. When the luster of “new” wears off, some continue to be popular, and others fade into obscurity.
Gangnam Style was great at the time, but it ain’t Stairway to Heaven. Success takes a lot of time. Even the fastest growing companies like Google or Facebook took years to develop before they hit a sustainable stride.
Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.