Blind Unicorn Glasses. The role of data in driving startup success — guest column

From Netflix’s personalized binge-worthy recommendations to Amazon’s predictive prowess, data isn’t just information – it’s the secret sauce to startup stardom. In an exclusive guest column for AIN, Vlad Kytainyk, CEO of KITRUM, tries to bring clarity with a fresh perspective on the pivotal role of data in driving startup success.

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What percentage of startups become unicorns? The report by CB suggests a range between 0.01% and 0.1%. I know it’s small. Besides the sad news, I have another one — on average, 90% of startups fail within the first three years, according to The Global Startup Ecosystem Report 2022 by Startup Genome. But why does it happen?

Chat GPT gives the following reasons: lack of market need, ineffective management, competition, financial difficulties, technical problems, lack of business model, and legal and regulatory problems.

All is true, but ChatGPT needs to explain the foundation of all these reasons. AI can’t yet isolate the main one based on data and experience, but an entrepreneur can (proving that humans are still good at something).

What Сan You Miss By Not Taking Into Account Data?

Yeah, I’m talking about working with data again. A proper primary project audit can solve all the above challenges based on my experience as CEO and co-founder of international companies and projects:

1. Often, a startup is just an excellent idea based on the enthusiasm of the funders. With the right analytics, it becomes clear that the concept, although impressive, requires N resources in entirely different planes, which were not considered at the start.

2. The analysis of competitive goods should have considered imported goods, which can completely change the project’s business model.

3. Potential product users’ statistics are also lame due to outdated systems. Technical problems account for 12% of startup failures, according to the opinion in Failory Newsletter for startup runners.

4. Sometimes, after detailed analysis, a startup from one economic sector moves to another — remember the McDonald’s movie where the lawyer tells Crook, “You’re not selling burgers, you’re selling land.” Forbes suggested that nearly 70% of startups fail due to no market need.

5. Statistics can tell you how many narrowly focused startups succeed and how many don’t. This data can be compared and safeguarded against mistakes.

6. Risks are not a hypothetical fear of something but a mathematical value that can be calculated no worse than in poker.

7. Finance — any figure has reasoning and options for use. A study by the Kauffman Foundation reveals that 42% of startups fail within the first 3 years, often due to cash flow problems.

8. Legal issues — dealing with the legal framework is standard data work, and I’ve seen more than one case where the options for one party to a contract were not fully explored, which became a problem.

Illustrations Of How Data Saves Businesses

Here are 3 examples of how data analysis is used by already existing unicorns to inspire you to use data as much as possible:

1. Netflix Cancels Recommendation Fatigue to Win

Netflix HQ found themselves in a challenging period, with a potential surge of cancellations on the horizon. Why? Streaming fatigue. Users were inundated with suggestions, feeling overwhelmed by content that didn’t align with their interests. They craved personalization, a reflection of their unique viewing habits.

Netflix, known for its pioneering spirit, refused to back down. They understood that the key to the problem lay in data, hiding user behavior. They developed a sophisticated digital framework, meticulously analyzing every click, scroll, and star rating. These data assets revealed a vivid picture of each subscriber’s preferences.

The results were nothing short of excellent. Armed with this new understanding, Netflix was able to tailor recommendations. No longer a generic approach, suggestions became personalized invitations to hidden gems and binge-worthy content. The effect was profound. Cancellations were reduced to a trickle and replaced by a wave of satisfied subscribers. Netflix solidified its position as the streaming giant. In 2013, Netflix won an Emmy award for “Personalized Recommendation Engines For Video Discovery.”

In 2023, Netflix smashed expectations, raking in an incredible $8.8 billion in revenue! 

How? This time, they looked at the data of non-paid account sharing between users and announced a global password crackdown. Again and again, by analyzing their data and improving product and advertising, Netflix has grown.

This dominant performance shows the streaming giant is firing on all cylinders. Netflix is looking to the future, forecasting continued healthy double-digit revenue growth for the year. 

2. Amazon Anticipates Customer Needs with Predictive Analytics

Imagine the relief when the customer clicks “order” excitedly, knowing that the dreaded “out of stock” message is passed. It’s a game-changer for both retailers and customers. However, for giants like Amazon, this scenario is becoming a reality. Their secret weapon? Data is the unsung hero of the retail world.

Amazon uses cutting-edge data analysis, like a digital fortune teller, to predict what you’ll want before you even know it. They delve into vast information — past sales, browsing habits, and broader market trends. All this data clearly shows what products are in demand and what might gather dust on the shelf.

The result is a mutual victory. Amazon maintains its inventory levels perfectly balanced, ensuring shelves are stocked with what customers desire. No more stockouts, no more disappointment. It is keeping Amazon on top of the retail game. So next time you hit that “order” button, remember — it is data work.

3. UPS Streamlines Delivery Routes and Saves Millions

For a logistics giant like UPS, every delivery truck caught in traffic is a significant blow to efficiency. The cumulative effect of these delays, akin to tiny daggers, could lead to a substantial headache. With a fleet spanning the country, UPS was constantly fighting traffic jams and desperately needed a solution to shave precious minutes (and gallons of gas) from its delivery routes.

But UPS had a secret weapon — data. They equipped every truck with a digital knight and a GPS that constantly fed information back to HQ. This real-time traffic intelligence and historical delivery data transformed into a magic map. It allowed UPS to analyze distance and navigate the ever-changing beast of traffic congestion. The result? Their routes became laser-focused, avoiding gridlock and streamlining deliveries.

The impact of this data-driven approach was significant. UPS now saves millions of dollars annually, thanks to reduced fuel consumption and more on-time deliveries. But the real victory is a smoother-running operation that ensures your packages reach your doorstep, regardless of rain or traffic jams. So, the next time you see the familiar brown truck, remember— data is that silent hero, making your deliveries faster and greener.

Is Unicorn Company DNA in Every Startup?

Overall, I suppose every startup is already a unicorn. There are no rabbit startups, mosquito startups, or possum startups. There are only unicorn startups. It’s just that only those who can see it reach the unicorn glade. Stats are precisely the points that help you get there, but those points:

1. not everyone has them,
2. they don’t fit everyone, 
3. there are few of them.

I know of teams that are just as dedicated to treating unicorn vision, and they are vital. Without them, a blind unicorn will most likely not make it to the clearing (I say “most likely” because there are circumstances where a unicorn just randomly ran and made it to the right place; I’m not implying anything; it just happens).

Sometimes, points can help initially, but they crack at some point, and then you need to upgrade them. It’s a whole science, too, where a unicorn needs to pitstop at the proper unicorn mechanics.

Only 10% of founders possess the necessary skills to successfully lead their companies through all stages of growth. Be in their range; use data. DATA is much more than money, success, or an idea. It allows you to consistently graze in a clearing with other unicorns without worrying about your eyesight. Statistics are essential in everything, from global to small; don’t fear them.

P.S. Statistics drop is here — the word “unicorn” was used in this text 18 times.

Author: Vlad Kytainyk, CEO of KITRUM