7 Big Things A Start-Up Must Have To Succeed

While no formula guarantees success, there are several consistent factors that significantly influence the success or failure of a potential startup. The presence or absence of these elements often determines whether a start-up achieves its objectives or joins the majority that do not survive their first few years.

This article outlines 7 fundamental requirements that founders should address before seeking investment, launching products, or scaling operations. 

1. A Clear Solution to a Validated Market Problem

Start-ups exist to solve problems. This may seem obvious, but many ventures fail because they build products seeking problems rather than solutions addressing verified needs.

Before committing substantial resources, founders must validate that:

First, the problem exists and affects a definable market segment. Speak directly with potential customers. Document their current challenges, the costs these challenges impose, and the inadequacy of existing solutions. This validation should involve structured interviews with at least 20 to 30 individuals or organizations that fit your target customer profile.

Second, the problem is significant enough to warrant a paid solution. Not every problem justifies a business. Customers must experience sufficient pain or opportunity cost that they are willing to allocate budget to address it. Ask potential customers what they currently spend on solutions or workarounds. If the answer is nothing, understand why before proceeding.

Third, your proposed solution effectively addresses the validated problem. Build a minimum viable version and test it with real users under real conditions. Collect feedback on whether it actually solves the problem as intended and whether users would pay for it.

Many start-ups skip or shorten this validation process due to founder conviction or eagerness to build. This frequently leads to products that customers acknowledge are well-executed but ultimately do not purchase. Validation is not a formality. It is the foundation upon which viable businesses are constructed.

2. Differentiated Value Proposition and Competitive Positioning

Markets rarely reward similar products. Even if you are solving a real problem, you must articulate why customers should choose your solution over alternatives, including the option to do nothing.

Your differentiation must be:

Meaningful to customers. Features that you consider superior must translate into benefits that customers value. Technical sophistication matters only if it produces outcomes customers care about, such as time savings, cost reduction, quality improvement, or risk mitigation.

Defensible over time. Consider what prevents competitors from replicating your advantage. This might be proprietary technology, exclusive partnerships, regulatory barriers, network effects, or accumulated expertise. Differentiation based solely on being first to market or having better execution is typically not sustainable.

Clearly articulated. If you cannot explain your competitive advantage in two or three sentences, you will struggle to convince customers, employees, and investors. Vague claims about being "better" or "more innovative" are insufficient. Specify precisely how you differ and why that difference matters.

Conduct a thorough competitive analysis that includes direct competitors, indirect alternatives, and the status quo. Understand their strengths, weaknesses, pricing, and customer base. Position yourself where you have genuine advantages, not where you wish to compete.

3. Viable Business Model and Path to Profitability

A start-up is a business, not an experiment. While early-stage ventures may operate at a loss while establishing market presence, founders must demonstrate a clear path to profitability with realistic assumptions.

Your business model should address:

Revenue structure. How will you charge customers? One-time purchases, subscriptions, usage-based fees, transaction percentages, licensing, or hybrid models each have implications for cash flow, customer acquisition strategy, and long-term value. Select the model that aligns with how customers prefer to buy and how your costs are structured.

Unit economics. Calculate the lifetime value of a customer relative to the cost of acquiring that customer. Viable businesses typically require LTV to CAC ratios of 3:1 or better. If your ratios are less favorable, identify specifically how they will improve with scale or what changes to your model are required.

Margin structure. Understand your gross margins and the path to positive operating margins. High customer acquisition costs are acceptable if lifetime value justifies them. Low gross margins are manageable if volume can be achieved efficiently. Know your numbers and be prepared to defend your assumptions.

Scalability. Demonstrate how revenue can grow without proportional increases in costs. Businesses with poor scalability, where each additional dollar of revenue requires an additional dollar of expense, struggle to achieve meaningful profitability.

Investors, partners, and potential employees will examine your business model carefully. Founders who cannot articulate their path to profitability with specific numbers and timelines will struggle to secure resources.

4. Capable and Committed Founding Team

Investors consistently state that they invest in teams more than ideas, and for good reason. Ideas evolve, markets shift, and strategies change. Teams either adapt and execute, or they do not.

Evaluate your founding team honestly:

Relevant expertise. Does your team possess knowledge and experience relevant to the problem you are solving? Technical expertise matters for technology ventures. Industry experience matters for solving industry-specific problems. Go-to-market expertise matters for customer acquisition. Gaps in critical areas create execution risk.

Complementary skills. Strong teams combine different capabilities. A team of three engineers may struggle with sales and marketing. A team of three business development professionals may struggle with product development. Assess where you have redundancy and where you have gaps, then address the gaps through hiring, advisors, or co-founders.

Commitment and alignment. Are all founders full-time and fully committed? Do you have alignment on vision, strategy, roles, and equity? Misalignment on fundamental questions often emerges under stress and can destroy ventures. Address these issues explicitly at the outset through founder agreements and regular communication.

Ability to attract talent. Your founding team must be capable of recruiting employees, advisors, and investors. Assess honestly whether your team has the credibility, network, and communication skills to attract the resources you will need.If your team has significant weaknesses, address them before seeking funding or launching. Adding the right co-founder or key hire early is considerably easier than correcting team deficiencies after you have committed to a direction.

5. Sufficient Capital and Financial Runway

Start-ups require capital to operate before they generate sufficient revenue to cover expenses. Undercapitalization is among the most common causes of failure.Founders must:

Calculate realistic capital requirements. Build a detailed financial model projecting expenses and revenue over at least 18 to 24 months. Include product development costs, operating expenses, salaries, customer acquisition costs, and a contingency buffer of at least 20 percent. Most founders underestimate both the capital required and the time required to reach milestones.

Secure adequate funding or bootstrap appropriately. If raising outside capital, ensure you raise enough to reach meaningful milestones that justify a subsequent funding round. Raising too little capital can trap you in a position where you have made progress but not enough to attract follow-on investment. If bootstrapping, ensure your personal financial situation allows you to sustain the business through its early unprofitable period.

Manage cash flow carefully. Monitor burn rate, runway, and cash position constantly. Know precisely when you will run out of money and plan fundraising or cost adjustments well in advance. Running out of capital with no alternatives is a common and preventable failure mode.

Understand your funding options. Different funding sources have different implications. Venture capital brings expertise and networks but also expectations for rapid growth and eventual exit. Angel investors may be more patient but provide less capital. Debt requires repayment regardless of success. Grants and competitions provide non-dilutive capital but are competitive and time-consuming. Select funding sources aligned with your business model and growth trajectory.

Inadequate capital forces premature compromises on product quality, market positioning, and team composition. Ensure you have sufficient resources to execute your plan.

6. Clear Go-to-Market Strategy and Customer Acquisition Plan

Building a product is necessary but insufficient. You must have a concrete plan for acquiring customers profitably and at scale.

Your go-to-market strategy should specify:

Target customer segments. Who are you selling to first? Be specific about company size, industry, role, geography, or consumer demographics. Trying to sell to everyone simultaneously dilutes resources and messaging. Identify the segment with the most acute pain, the least resistance to adoption, and the highest willingness to pay.

Customer acquisition channels. How will you reach your target customers? Options include direct sales, inside sales, channel partners, digital marketing, content marketing, events, referrals, or product-led growth. Different channels have different cost structures, cycle times, and scalability characteristics. Test multiple channels but focus resources on those proving most efficient.

Sales process and conversion funnel. Map the steps a prospect takes from initial awareness to closed customer. Understand conversion rates at each stage and where prospects drop off. Identify what messaging, materials, or actions improve conversion. Document this process so it can be trained and replicated.

Pricing and packaging. Determine how you will price your offering and what tiers or packages you will offer. Test pricing with early customers to understand elasticity and willingness to pay. Pricing is not static; adjust based on market feedback and competitive dynamics.

Customer retention and expansion. Acquiring customers is expensive. Retaining them and expanding their usage or spending is typically more profitable. Build retention strategies into your initial plan, including onboarding, customer success, support, and expansion offerings.

Many founders focus intensely on product development while giving insufficient attention to customer acquisition. The result is a good product that few customers discover or purchase. Balance product and go-to-market efforts from the outset.

7. Appropriate Legal and Operational Infrastructure

While less visible than product development or fundraising, proper legal and operational foundations prevent problems that can seriously damage or destroy start-ups.

Establish appropriate infrastructure in the following areas:

Corporate structure and governance. Form a legal entity appropriate for your business and jurisdiction, typically a corporation or limited liability company. Establish clear governance through bylaws, operating agreements, and board composition. Issue equity properly through restricted stock or options with appropriate vesting schedules.

Intellectual property protection. Identify what intellectual property your business creates and ensure you protect it appropriately through patents, trademarks, copyrights, or trade secrets. Ensure that all employees and contractors assign their work product to the company through written agreements. Failure to secure IP early can create significant problems when seeking investment or partnerships.

Contracts and agreements. Use written agreements for all material relationships, including founders, employees, advisors, contractors, customers, and vendors. Verbal agreements are difficult to enforce and create ambiguity. Standard templates are available for common agreements, though complex or unusual situations warrant legal counsel.

Regulatory compliance. Understand what regulations apply to your business and ensure compliance. This might include securities regulations if raising capital, data privacy regulations if handling personal information, industry-specific licensing, or employment law. Non-compliance can result in fines, lawsuits, or shutdown.

Financial systems and controls. Implement proper accounting, financial reporting, and internal controls from the outset. Maintain clean records of all transactions, separate business and personal finances, and produce regular financial statements. This discipline becomes critical when seeking investment, undergoing audits, or considering acquisition.

Insurance. Obtain appropriate insurance coverage, which typically includes general liability, professional liability, directors and officers liability, and cyber liability depending on your business model. Insurance protects against risks that could otherwise threaten the company's viability.

Many founders view legal and operational matters as distractions from building the business. This perspective is short-sighted. Problems in these areas often surface at the worst possible times, such as during due diligence for fundraising or acquisition. Address them proactively when they are manageable rather than reactively when they have become crises.

Applying This Framework

These 7 requirements are not sequential steps but interconnected elements that must be developed in parallel. Weaknesses in one area often create problems in others. A great team cannot succeed with an unviable business model. A validated problem cannot generate revenue without a go-to-market strategy. Adequate capital is wasted without proper infrastructure.

As you evaluate your start-up, assess the following:

• Have you validated the problem and solution with real customers?
• Can you clearly articulate your differentiation?
• Do your unit economics support a path to profitability?
• Does your team have the skills and commitment to execute?
• Do you have sufficient capital to reach meaningful milestones?
• Do you have a concrete plan to acquire customers profitably?
• Have you established proper legal and operational foundations?

Where you identify gaps or weaknesses, address them before they become impediments to progress. Seek advice from experienced founders, advisors, or professionals who can provide objective assessment and guidance.

Start-ups are inherently risky ventures. Markets are unpredictable, competition is fierce, and execution is challenging. However, addressing these 7 fundamental requirements substantially improves your probability of success. They do not guarantee it, but their absence significantly increases the likelihood of failure.

Approach your venture with appropriate diligence, realistic assessment, and disciplined execution. The majority of start-ups do not succeed, but those that do typically demonstrate strength across these 7 areas.

Want to learn more? Our team of dedicated attorneys and consultants are here to work with you to make sure your business starts off on the right foot. Contact us to learn more and to see if we can help you with your business needs! 


^*Disclaimer: This article is intended solely for educational purposes and is not intended as legal advice resulting from legal representation, broker-dealer advice, tax professional advice, or other professional advice resulting in an implied or actual agreement with a professional acting in a representative capacity. This article does not directly or indirectly establish a relationship of representative capacity. All copyright and rights belong to Fox & Chester and are reserved. Consult with a professional where applicable.