The Startup Genome project was able to analyze 3,200 companies from around the world to attempt to diagnose why only 1 in every 12 startups succeed. The main reason for failure is premature scaling. Companies who scale prematurely are referred to as inconsistent.
Successful startups need to have a good product that scales effectively into a large market. There are five dimensions that must be balanced in order to scale properly through the various stages of growth. They are: customers, product, team, business model, and funding. Founders who are able to effectively and appropriately manage these five dimensions depending on what stage the company is in, are able to be the rare consistent startup.
You can see the full report HERE. Based on the resulting data, here are some tips:
1. Spend a LOT more time on customer discovery. You need to thoroughly understand the problem you are solving, validate that people are interested in your solution, and know who the target users are. Too many startups spend a large majority of time and resources on product development in the early Discovery phase.
2. Don't be afraid to have unpaid customers in the Discovery and Validation phases. Your users during these stages are providing the valuable data and information you need to succeed in the Efficiency and Scaling phases. When you have refined your business model and are ready to scale, it might be a good idea to find a way to reward your early adopters. By including these users throughout the process, you are building brand loyalty and getting crucial feedback.
3. Don't be hands off in the product development process. You've now taken the time to really understand your users and the problem you're trying to solve for them. Outsource as little as possible to make sure all of these insights are incorporated into the solution you create.
4. Stay lean up front; party in the back. While you are doing your customer discovery, building your minimum viable product, and gaining your proof of concept, do not worry about hiring employees or raising capital. Consistent startups who have figured out how to manage the five dimensions see 18X more funds raised and 50% larger teams during the Scaling phase as opposed to their inconsistent fellow startups.
Many founders have a hard time objectively recognizing which growth stage they are actually in. Like the child who claims they can't wait for adulthood, only to be disappointed when they get there too fast, young companies need to evaluate and wait until they are truly ready to scale. Spend your "childhood" playing and getting to know your customers and building a great product for them to try and validate. In your adolescence, self reflect on the younger stages to refine a strong and sustainable business model. And then finally, you will be able to share your vision, invite others to join your team, and confidently be able to ask for the funding you truly need to grow.