Flipping the script on startup success

Most would-be entrepreneurs have heard the grim statistic: a large majority of new ventures fail. Industry studies suggest that roughly seven to nine in 10 venture-backed startups never make it. But serial tech entrepreneur Jothy Rosenberg argues the narrative can be flipped.

Drawing on 35 years of experience and nine startups (two of which sold for over $100 million), Jothy emphasizes during a webinar with our DayOne alumni five core principles that founders should get right from day one. By focusing on these fundamentals – the right CEO, a real market need, a lean MVP, true product-market fit and a strong culture – founders can shift the odds in their favor.

In a tech startup, the founder CEO almost always needs a deep technical understanding of the product. That founder-driven leadership provides credibility and continuity as the company iterates on its core innovation. “One reason you want to be CEO is that you have knowledge of the market and the technology,” Rosenberg says. This combination lets a founder-CEO represent the vision, pitch to investors and adjust strategy more nimbly. As Rosenberg notes, you “can raise money much more easily” when the CEO is the person who built the technology.

At the same time, a founder must be self-aware. Rosenberg’s own experience illustrates this nuance. Early in his career he ran a cybersecurity startup out of Boston. When the initial commercial market proved too tough, he pivoted to U.S. defense contracts. That pivot even required him to replace himself with a new CEO who had the right relationships and sales skills for the government market. In other words, Rosenberg found that technical founders make the best CEOs until another skill set is needed. Industry research supports this: studies of startup teams show that ventures are most likely to succeed when a technical founder is on the founding team and is willing to bring in business-oriented specialists as needed. A Harvard Business Review analysis similarly concluded that the strongest startups typically have technical founders who hire experienced businesspeople early on.

Source: CB Insights, “Top 20 Reasons Startups Fail”

The second principle is disciplined market validation. Many smart founders make the mistake of falling in love with their technology and then searching for a problem to solve. Rosenberg cautions against this trap: entrepreneurs must start by defining a problem in a large, growing market, and then build a solution to address it. This means quantifying the total addressable market (TAM) and talking to prospective customers from day one. If the market is too small or the need is marginal, the startup is doomed. In fact, CB Insights found that the #1 reason startups fail is “not targeting a market need” – in other words, solving a problem that nobody cares about.

Founders can flip this script by rigorously validating demand. Interview potential users, sketch out use cases, and test assumptions about customer pain points. Rosenberg emphasizes understanding who will pay and why. If possible, find lead customers or early adopters who are desperate for the solution. Investors also look for evidence of a large market. As a recent article notes, VCs often won’t fund a startup until it has shown clear market traction or proof of demand. Rather than hoping the market appears, Rosenberg advises that founders should build their hypotheses and experiments around a clearly “good market” that can grow over time.

Once you know the right problem and market, the next step is to build the minimum viable product (MVP) that will test your core assumptions. This means resisting the urge to over-engineer or add bells and whistles. Instead, deliver the simplest version of the product that lets you learn what customers truly want. The lean startup movement defines an MVP as “the version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort”. In practice, that means you build just enough functionality to get user feedback, then iterate.

Rosenberg’s own ventures highlight this lesson. For example, his most recent company, Dover Microsystems, began with an ambitious design for a secure processor (CoreGuard). But when they tested CoreGuard 1.0 with real customers, the team realized it was too large and slow for commercial use. That initial design was essentially a prototype that revealed critical flaws. Instead of throwing more features at it, the team went back to basics and completely rewrote the chip architecture. The new version was 85% smaller and fast enough for real-time use. This dramatic pivot turned their MVP into a viable product that could scale. In short, Rosenberg advises founders to build small, measure market reaction, and be prepared to pivot. The goal is to uncover market fitness while expending minimal resources, avoiding the fate of spent capital on features nobody uses.

MVPs and iterations lead up to the moment investors call product-market fit (PMF). Achieving PMF means you have a product that truly satisfies a strong market demand. Put another way, users and clients pull the product into the market without heavy sales effort. This can look like rapid sales growth, low churn, viral referrals, or usage surges. Marc Andreessen famously defined PMF as “being in a good market with a product that can satisfy that market”, and it is the clearest signal that a startup has escaped its trial phase.

Identifying PMF has practical implications. Investors typically seek clear evidence of product-market fit before committing. A startup that can demonstrate consistent customer demand and repeatable sales makes fundraising far easier. Founders should therefore track leading indicators: Are new customers signing up without heavy promotion? Is revenue accelerating? Has a sustainable sales process emerged? When these conditions appear, it often justifies scaling up the team and budget. Conversely, Rosenberg warns that founders should not declare victory too early. A handful of pilots or hires doesn’t guarantee fit; it takes persistent customer feedback and data to know when PMF is truly achieved.

Finally, Rosenberg stresses that culture matters early, not just after the team grows up. Even with the perfect technology and market, a startup can crumble if its people don’t share a clear set of values and purpose. Research shows that developing a strong startup culture is crucial for early-stage companies. A healthy culture – one that promotes open communication, mutual respect and a shared mission – can attract top talent and convince investors that the team is firing on all cylinders. Startups with engaged employees and clear values can also weather challenges better, because each team member feels invested in the outcome.

The key is to be intentional about culture from the beginning. Rosenberg advises founders that the moment an idea becomes a business, they should define how people will be treated and what work environment they want to create. If founders ignore culture early, they risk “losing control of it” as the company grows. This can lead to hiring mismatches, friction, or even toxic dynamics that cost time and money. By contrast, setting a positive tone – for example, by rewarding teamwork, celebrating customer-focused wins and leading by example – makes it easier to hire and retain A-players. A good culture doesn’t happen by accident; Rosenberg notes it must be nurtured as carefully as any product feature.

By mastering the five principles outlined above, founders can shift the odds against failure. Rosenberg’s message is clear: deep technical leadership, relentless market validation, a lean build-test cycle, genuine customer traction, and an empowering culture – these are the bedrock of a successful tech startup. When founders apply hard lessons from past failures and stay disciplined about the fundamentals, their ventures are far more likely to thrive. In short, they can flip the script on the usual failure narrative and create companies built for lasting impact.

For entrepreneurs navigating these challenges, having access to the right network, expertise and guidance can make all the difference. That’s where initiatives like DayOne come in, offering a trusted space for healthtech innovators to refine their strategy, connect with domain experts, and learn from those who’ve been through it all before. While no playbook guarantees success, the ability to share lessons, test assumptions, and get honest feedback from a community that understands the journey can go a long way toward avoiding the most common – and costly – missteps.