Seven key traits of successful start-up founders

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Aspiring entrepreneurs face tough competition and scary odds: Hundreds of thousands of new U.S. businesses launch monthly, and about a quarter will fail just within their first 12 months.

Among the many challenges that budding start-ups encounter are differentiating themselves from rivals, not running out of cash, and tapping into what consumers really want. One study found that the top reason new businesses fold is that they are building a product that the market doesn't actually need.

Being smart and hardworking can only take you so far, said Avi Savar, managing partner and CEO of business accelerator Dreamit.

"You have to have that vision, that crystal ball mentality to project into the future," he said. "You also need resilience, and no fear, because for every 'yes,' you're going to get a hundred 'nos.' "

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Of course, most entrepreneurs have already heard the speech about perseverance, and they know that beating the odds takes much more than a can-do attitude: Your unique qualities will make or break your company.

Here are seven ways successful entrepreneurs stand out.

1. They’re willing to start over from scratch

Most start-up founders are prepared to fight for their ideas, but being ready to scrap them entirely can be just as valuable.

"Passion is so important, but if you're too passionate about what you're doing, you could have blinders on," said Savar. "It's good to have willingness to burn the house to the ground and start over, if necessary."

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The founders of event ticket search engine SeatGeek were originally focused on a different business idea — a blog aggregation platform — when they joined Dreamit, Savar said. Both avid sports fans, the founders were inspired to build a tool they themselves would want to use, after realizing their first pitch was not panning out. They launched SeatGeek in 2009, and have secured more than $100 million in funding to date.

2. They’re brave about frontloading hard conversations

Even the most successful start-ups can be torn apart by internal conflict, and studies show that 65 percent of start-ups that fail do so because of friction between co-founders. The key to preventing a blowup down the line is building clear communication early on, said Savar.

"If the company is your idea, the moment any new person you bring on says yes, you need to talk portions right away," he said.

As time passes, you also need to be careful not to let resentments fester, said Nicole Glaros, chief product officer at start-up accelerator Techstars.

"You need to have difficult conversations without getting emotional or phrasing things as an attack," she said. "You just have to look the person in the eye and say something like, 'I feel a lack of trust when you counter me in public,' for example."

Founders who have waited a little too long to discuss percentage stakes in the company should approach the subject with care, said Savar. Don't send an impersonal email out of nowhere, he said, but rather bring it up over dinner and drinks.

"Have a glass of scotch, commiserate a little, and put expectations out in the open," Savar said. "Once everyone is happy then send that formal email."

3. They have enthusiasm — for criticism

The very best entrepreneurs are insatiably curious about how to improve their own business, said Joshua Baer, founder and executive director of Capital Factory in Austin, Texas.

"Truly great founders are excited and intrigued by criticism," he said. "They don't feel like they need to object to every concern."

When students in Baer's entrepreneurship class at the University of Texas pitched a new food delivery app, he and other mentors pointed out to them that the space was already crowded with well-funded competitors.

"Nobody could get really excited because it felt too late to the game," Baer said. "But they weren't stubborn and they listened to that feedback."

In response to the critiques, the students went on to found Harvest Delivery, a KAYAK-like app that aggregates several different Austin-based food delivery services into one place.

4. They aren't afraid to ask customers to pay

Many budding entrepreneurs believe they have to give away their services and products for free to gain recognition, said Baer.

"But if your product or service is worthwhile, customers are willing to pay," Baer said, "and some will even pay in advance, which is great for cash flow."

One example Baer pointed to is Riskpulse (formerly called Stormpulse), a weather-tracking company that helps businesses plan against costs and damages from natural disasters. At first, the company provided its services cheaply or for free, until the founders ran into trouble closing a round of funding, he said.

"The investors came back with bad terms," Baer said, "but they were about to run out of money and were afraid they had no other choice."

Instead of taking the deal, the founders decided to test out a paywall — throwing in a discount for any business willing to pay for a year in advance, he said. The team was pleasantly surprised to see that many of their customers were not only happy to pay up front, said Baer, but did so the very next day.

5. They prioritize prototypes over capital

"There is this frenzy around venture capital today," said Techstar's Glaros. "Everyone wants to get in the game and it's seen as glamorous, which is dangerous thinking."

It's healthier, Glaros said, to focus on your ideas first, and funding second.

"It used to be that you had to start in your garage, and you'd use investor capital to scale your business, not to build initial prototypes," she said. "It's valuable to be forced to test your idea first, and to think about how you build a business differently when you have no money."

During the Iate 1990s, Glaros started with her father an online retail company selling bike racks and trash cans and the like to property management companies. She funded the business out of her own pocket, taking cash advances on her credit card when necessary, which was a struggle at first, she said.

"The financial pressure made me really focus on getting revenue," she said, "which is why I believe we became profitable quickly, within six months."

6. They go where the customer goes

Customers can do more than help you bypass the fundraising game — they can give you the keys to retooling a broken idea, said Glaros.

"The only thing ideas are ever secondary to is the customer," she said. "It's hard to go wrong when you are trying to surprise and delight your customer."

One example, Glaros said, is web-hosting company Digital Ocean. When she challenged the founders by asking them how they would stand out from their many competitors, they gave Glaros a one-word answer: Love. They would work night and day scouring message boards, researching what customers hated most about existing hosts; then they would make customers love them by fixing those problems, she said. In the end, the company created a one-button installation system that changed launching a server from a slow and painstaking ordeal to a "stupid simple" one, Glaros said.

"You need a relentless focus on the customer," she said. "Without that, you miss the real opportunities and solutions customers are willing to pay for."

7. They know when to walk away

Sometimes the hardest part of the start-up game is knowing how to quit while you're ahead, said Paul Bricault, managing director of Los Angeles start-up accelerator Amplify.

"A lot of great founders are very type-A, relentless people who can be blind to the reality they might have to sell at a lower number than they expected," he said. "Not everyone gets an acquisition offer, and that can be important when you have investors and a fiduciary responsibility to produce a return on capital."

The founder of AlphaDraft, a fantasy-league competitive video gaming website, decided to sell his company to fantasy sports site FanDuel following a $5 million seed round, said Bricault. Since growth in competitive gaming leagues depends a lot on partnerships and the volume of players, the founder realized his company would be better off within FanDuel's well-trafficked network, Bricault said.

"It's always hard to let go of something you started," he said. "But it's a good thing if your decision to sell is purely based on asking yourself, 'where does this company go from here' and on looking out for the business."