Sometimes it seems like companies come out of the ether and reach success overnight, but this is usually not how it works. Creating a lasting company takes hard work and a lot of time — and is a truly unusual phenomenon. According to David Thomson’s Blueprint to a Billion, the odds are one in 50 that an idea becomes a business, one in 20 that a funded business sees an initial public offering and one in 20 that a public company achieves $1 billion in revenue. It’s so rare that my colleague Aileen Lee, the founder of the venture-capital firm Cowboy Ventures, coined these elusive successes “unicorns.”
The odds for success are never in a startup’s favor. If you add things like a challenging market to the mix, making it big can seem insurmountable. Common sense says it’s hard to sell your products in an environment where people aren’t buying. Raising money is also onerous — capital dries up and with fewer options founders might have to settle for worse terms. For companies gearing up for a public offering, that event can be delayed indefinitely.
And yet, none of these challenges translate to “impossible” for the very best companies. Box delayed its IPO, but went public later with great fanfare and success. Some of our most celebrated companies — General Electric, Saleforce.com and Southwest Airlines — not only survived several downturns, but were started during an economic depression or recession. Many of today’s newest, hottest companies were started when things didn’t look so hot. Yammer, GitHub, Asana and Indiegogo were started in 2008, while Uber, Square and Kickstarter were founded in 2009.
The fact is, any company that is in it for the long haul will experience several bull and several bear markets. It’s impossible to avoid these cycles. Instead of trying to time them, startups must focus on what’s within their control — building an enduring product or service (regardless of market conditions).
Great companies will prosper in the good and bad times. Startups that have raised a lot of cash, have talented people and are building products that people need and want are the ones that are best prepared for any market.
Some might argue that challenging times can provide advantages. There’s an increased availability of affordable talent. Smart investors are always looking for the next big thing and great companies have an even better chance of standing out with less competition. Most importantly, any startup founder must remember that challenges present opportunities: When things are out of whack is when they are most ripe for disruption. It’s a time when immense value can be created.
There has always been a gold rush to new frontiers. Time and again we’ve seen how uncertain periods inspire young companies, which replace and quickly exceed the value of old companies. Some of our most beloved companies were started in times that were difficult — which, not coincidentally, is the exact time when we need innovation and the exact time when it flourishes.