On an average, startup success rate is about 10 to 20% or in other way if I put, startup failure rate is between 80 to 90% over a period of 10 years. There can be many reasons for this. Lets take one reason which is very common in most of the industries, especially IT. And the reason is waiting for the final product to come out. The fact is many startup don't know what is going to be the final product and this was true for most of the companies that have become big today. In my opinion, there is never a final product until death of the product has approached or all new developments for any time in future have stopped. Kind of 'End of Life' (EOL). Therefore a product launch is always alpha, beta or different versions and when time comes to launch a new product, the previous product becomes final (if they are related).
As I mentioned, it is Alpha, Beta and Final as the journey of a product. For a startup, launch of a final product is not the only thing required for success. That is just a small percentage in that overall pie but an important one. There are tasks like how to pitch it to the market, what to highlight when product is in alpha stage, what application to choose, how to price it, how to sell it, how to support early customers and how to retain them, how to manage all of these and so on. These things also plays a very big and important role. Lets understand this by taking an example.
Alpha version is the one which takes one of the main features of the final product early into the market. For example, in a Speech to Text converter product, an Interactive Voice Response (IVR) that is an interface to send Speech to a remote server, can be one of those features. Along with this one stable feature, Alpha version also contains not so finished features for example low accuracy Speech to Text engine. Lets say at the time of Alpha launch it gives just 65% accuracy in converting a speech input into appropriate text output. When such a combination is released as an Alpha version, people can still use it, money can be generated from this as well, provided it is presented in right manner. For example, an application which tries to spot keywords in a given speech input can be a good fit for this Alpha version. Here this application is not looking for 100% correct text but keywords in a given speech sentence to tag it. This application will choose those words as the keywords which have given high probability while converting Speech to Text and can leave the low probability words. The moment we choose this application, the accuracy of the Speech to Text increases from 65% to say about 85% . That is, 85% of the times, this application will select appropriate keywords as tags to mark a given Speech input.
In the next version i.e. Beta version of this product, improved accuracy can be launched, multiple interfaces for the IVR can be offered, new features like emailing the converted Text can be offered free to those customer who are using Alpha version and so on.
Now lets say it takes about 10 months of time to reach 85% of accuracy in converting Speech to Text. Assume that startup guys think that until we reach 85% accuracy we will not think of any application to launch for commercialization. What happens in that scenario? A startup which should have been running fast, should have been visible every where gets delayed by 10 months, it also losses early customers due to delay, it also finds behind in the competition with other startups and during these 10 months productivity of the startup also reduces as what was going on in the startup was product development alone. These kinds of delays are actually the big contributors in that 80 to 90% of failure rate.
It is interesting to note that human mind always seek for a perfect thing (unless that guy has got bored). But what is perfect for one person may not be perfect for others. Every product design can be broken into key components. It happens most of the times that as a whole, the product is not so perfect but some key components of that product are ready to go to market. Startups should always look for going out to the market and when whole is not ready they should consider what is ready. The part of the whole that are ready or perfect to go can mostly be presented in a way that people will buy it. The startup story can be delivered to customers in way that company has been releasing improved products with sound business practices and every application they sell to the people matches with what their offerings are.
Therefore, Alpha, Beta and Final - start small, scale big.