It takes a brave and talented team to found a company these days.The failure rate of all U.S. companies after five years is over 50 percent, and after 10 years it’s over 70 percent. Yet an elite collection of startups has been able to navigate the challenging path of the venture world to become billion-dollar organizations.
These “unicorn” companies have either disrupted existing markets or have created entirely new markets, thanks to a combination of technological innovation and clever go-to-market strategies.
Below are 10 lessons learned from 10 startup companies that have a combined worth of approximately $130 billion. Read on to uncover valuable business lessons you can apply to your own venture.
1. Build something that customers truly love.
When Airbnb was struggling to gain initial traction in 2008, Paul Graham, a founder of well-regarded startup incubator Y Combinator, gave the CEO of Airbnb some advice. Graham told Brian Chesky that he should focus on creating a product that people truly love, not a product that people like. As Chesky has gone on to say, it is better to make a product or service that one hundred people love rather than a product or service that one million people like.
When people love a product, they evangelize it to friends and colleagues. The network effect of evangelism from a small but passionate group of customers is enough to propel most businesses to amazing heights.
2. Establish a mission-driven company culture.
WeWork provides private and shared workspaces for small to medium-sized companies. The organization has offices in 20 cities in the United States, and in 20 countries around the world. Today WeWork is valued at approximately $20 billion, making it one of the largest privately held companies in the US.
WeWork has perfected the art of articulating a clear mission that speaks to their target customer. If you walk into any WeWork space, you’ll inevitably see a large sign with the phrase “Do what you love.” The company has a mission that the entrepreneurial and small-business community holds dear. Thanks to its mission-driven company culture, WeWork has been able to grow quickly.
3. Know when it’s time to pivot.
Atlassian makes business software that helps teams of all sizes work faster and better together. They are the creators of well-known products like Jiri and Confluence, among others. In early 2017, Atlassian announced that they had spent $425 million to purchase another business-software company called Trello.
Trello essentially beat Atlassian at their own game. They created a project-management tool that helped teams of all sizes to get things done. The Atlassian leadership team recognized this, and was bold enough to change course by acquiring a competitor before it was too late.
Related: 3 Rules for Making a Successful Pivot
4. Realize that markets can accommodate more than one disruptor.
Lyft was founded three years after Uber (2012 compared to 2009), but despite the fact the Lyft did not have first-mover advantage in the ride-sharing industry, the company is still worth approximately $11 billion, and is growing at a faster rate than Uber.
Let Lyft serve as an example that some markets are large enough to accommodate multiple disruptive startups. Simply because another company has first-mover advantage does not mean that you should scrap your startup idea. Lyft shows that, with the right positioning, many consumers will welcome a challenger brand.
5. Niche markets can be a great entry point for innovation.
Not every startup needs to be consumer-facing to become a unicorn. Twilio is a B2B technology designed to help businesses communicate more effectively with consumers. They make the SMS and voice technology used by Uber, Lyft and Netflix to send automated messages to customers.
Twilio is proof that developing a world-class product for a niche market can lead to the development of a unicorn company. Twilio provides best-in-class products that software engineers and product experts want to use, which is why the company is now valued at over $2 billion.
6. Consumers are looking for a frictionless shopping experience.
Businesses are investing billions of dollars in making shopping experiences faster and easier. From smart speakers to drone delivery to automated warehouses, B2C companies know that consumers have ever-increasing expectations.
However, it should be noted that not all shopping experiences are made better with automation. Instacart recognizes this, and sends a human to the grocery store on your behalf. The shopper communicates with the customer should a question about an order arise. When the shopper is done, groceries are delivered to the customer’s door in as little as two hours.
7. Sell the tools you would want to use yourself.
Believe it or not, one of the hardest parts of software engineering is maintaining a healthy code base. If not properly maintained, code can decay, making it difficult to innovate quickly.
New Relic is a platform made by and for engineers. (In fact, the company says working there is like “nerdvana.”) It was birthed out of a desire to help software engineers write better code by helping users to constantly monitor performance in order to make engineering teams more successful.
As a result of building a product that the founding team would want to use themselves, New Relic has developed into a $3 billion technology giant.
8. Mid-market organizations are often underserved.
HubSpot was launched in 2005. At the time, small and medium-sized organizations didn’t have many options when it came to digital marketing. Today, HubSpot has helped these organizations develop and implement automated inbound marketing strategies, and has become a $3 billion company in the process.
Whereas competitors like Marketo have slowly moved upmarket to attract larger companies like GE and Kaiser Permanente, HubSpot has found great success focusing on small and mid-market businesses. Thanks to a line of sales and customer-support tools in addition to marketing tools, HubSpot is increasingly becoming an all-in-one solution for thousands of businesses across the globe.
9. The public is willing to support forward-thinking organizations.
A recent study conducted by Google found that both millennials and members of Generation Z thought Tesla was one of the “coolest” companies in the world. This is a notable accomplishment, considering that many respondents were not old enough to own a Tesla in the first place.
Let this serve as a lesson that the public is willing to support organizations that strive to change the world in significant ways. Not only is Tesla considered to be a cool company, but 2017 has seen a significant increase in the organization’s valuation. Tesla stock is up more than 75 percent because investors believe that the company is on track to significantly alter personal transportation.
10. All sectors can be disrupted, even government.
It’s easy to think that government is one sector that is impossible to disrupt. Legislation, procurement and bureaucracy present problems for startups. But Palantir shows that even government agencies are prepared to embrace innovative technologies if properly implemented.
This secretive startup provides technology solutions used by federal governments to detect fraud and suspicious behavior in order to catch criminals or preempt serious crimes. By maintaining a low public profile while attracting some of the world’s best data scientists and software engineers, Palantir has been able to make significant inroads in industries that were thought to be untouchable
Each of the successful startups listed in this article has a unique success story. However, there are several characteristics that most of the companies in the article share. Organizations that foster a customer-centric and mission-driven culture, while offering a world-class product, tend to be successful.
When founding teams create solutions that improve the daily lives of consumers or professionals, customers eagerly evangelize the product, causing widespread adoption. Follow the hard-earned lessons outlined in the article, and maybe your startup will join the ranks of the unicorns.