The overnight success that wasn’t

What is one word that immediately comes to mind when you hear the word startup founder? When I recently watched The Founder, a biopic about Ray Kroc of McDonald's fame, the word that came to mind for me is persistence.

Ray Kroc is the person most associated with the founding of McDonald's, but he was not the founder. The founders were Richard and Maurice McDonald, two brothers who had left New Hampshire to seek entrepreneurial glory in California. They tried a few business ideas before they decided on opening their first restaurant in San Bernardino, California in 1940.

The first restaurant was a drive-in with a huge menu. Patrons would drive up in their car to park, order over a speaker, and a waitress would come out with their order. While it made money, they noticed that most of their sales were on burgers and fries.

They decided to pivot. Their previous big menu was whittled down to a handful of items. They did away with drive-up system so people had to get out of their cars and wait in line. To serve more patrons, they implemented an assembly line system for delivering food faster than any restaurant at the time.

The restaurant reopened in 1948 and flopped immediately! People were confused about getting out of the car and waiting in line. Most entrepreneurs would have panicked at this stage. The brothers stuck to their convictions, and over time and word of mouth, built a loyal following.

The store was wildly profitable, but they brothers struggled to grow beyond the few franchises they established in nearby cities. This is when Ray Kroc entered the picture, meeting the brothers in 1954 while selling milkshake machines. Ray became fascinated with the possibility to take a working model and set up a network of franchises that could scale McDonald's across America.

By 1960, McDonald's grew to 228 franchises generating $56 million per year. In an ensuing battle for control, the brothers sold the rights to their business and the McDonald’s name to Ray Kroc. Now that he had full control, Ray scaled the business to $1 billion in sales by 1972 across 2,200 restaurants.

Persistence is a quintessential entrepreneurial trait. Without persistence, it’s easy to stall or give up at any stage of the journey. As Ray Kroc quotes former US President Calvin Coolidge in the movie:

The quote goes on to talk about talent, genius, and education not being enough. Persistence is the great equalizer when competing against better pedigree, heavily resourced competitors, internal doubts, and the short-term expectations of the market.

Amazon understood this early on when it grew from scrappy startup in the mid-90’s to a billion-dollar global enterprise by the early 2000’s. When Wall Street questioned Amazon on profitability, Jeff Bezos responded:

Startups are a hypothesis about the future viability of a business model. This is why VC’s have a seven to ten-year time horizon to book returns on their initial investments. They understand that startups have to constantly execute, learn, pivot, and iterate in order to identify a winning model. Many established companies are never that patient, giving new ventures less than a year before pulling the plug.

It is easy to look at the lack of initial traction for a new idea and think it is a flop. The McDonald brothers could have easily folded when customers rejected their new dining concept. But the vision of serving well-prepared fast food quickly was a ground-breaking idea for the era. As Jeff Bezos said:

This is the struggle of the journey versus the destination. Founders innately understand their vision, but often hit roadblocks in execution or stall out on initial growth. This leads to doubts, when it was more likely a flawed assumption, misreading an observation, or impatience in getting results.

Overnight success is anything but overnight. This was a persistent theme in my interviews with founders at the AWS Summit in Tel Aviv. Many Israeli startups grind for years before they getting traction, but we only see the end result and think everything was smooth sailing. What we do not see and is often not discussed is the trough of sorrow, the pivots, and the years of toiling in obscurity.

Entrepreneurship is a long game. Vision fuels that journey, but vision is not a plaque on the wall or nice platitudes. It is the light that guides the way and the bedrock for success. It just requires persistence in order to reap the rewards of the journey.

How are you staying the course in your own startup journey? Were there times you doubted your vision only to be proven right?

Mark & Basil

Speaking of Israeli startups, one of the things that immediately became apparent this week is how true the Startup Nation label is when talking about Israel. A huge percentage of the attendees of the AWS Summit in Tel Aviv were startup founders, and every startup session was standing room only!

But what makes Israel “Startup Nation”? We wanted to dig a bit further and found nine interesting observations about Israel that has helped to fuel their thirst and success for tech entrepreneurship:

• Israel has the world’s highest number of startups per capita with one startup for every 1,000 people.

• Israel leads the world in R&D expenditure, investing 5.44% of GDP into R&D.

• Israel is home to over 350 multinational tech R&D centers.

• Israeli startups have a strong track record of billion dollar plus exits, such as Mobileye, Waze, Galileo, Mercury, and many others.

• Israel has the world’s highest per capita technical talent of 140 engineers per 10,000 employees.

• Israel is a vibrant VC market, deploying $53.1 billion in startup capitalsince 2020.

• Israel is a deep tech innovation leader, for example creating 10% of the world’s cybersecurity startups.

• Israel has a dense tech ecosystem of incubators, co-working spaces, and over 30 accelerators.

• Israel has a long history and culture of self-reliance and risk-taking.

This is a topic we plan to talk about more often, diving deeper into many of the startup ecosystems we visit to understand what helps startups succeed in certain regions and how to take those lessons learned and apply them to other regions.

The AWS Summit in Tel Aviv was a huge success this week with over 10,000 people attending! It was amazing to see the energy and enthusiam for all things cloud computing and AI and of course startups.

Next on the whirlwind global startup tour next week is Sydney, Doha, and Washington DC for the Public Sector Summit. Then it is off to South America to join 42Geeks on a multi-city LATAM tour to meet startups, investors, and startup ecosystems builders. Want to meet up with the geeks, then follow the schedule and let’s make some time to connect in person!