Why do startups fail? The most common reasons ⬇️
Olena Bomko
45 replies
Why startups fail:
1. Founders and early employees' problems:
- Lack of experience. Business experience and niche expertise
- Network
- Lack of energy and stamina
- Bad first hires
2. Slow feedback loops
3. Selling vitamins vs pain killers
4. Bad positioning and no differentiation
5. Random acts of marketing
6. Treat it like a sprint, not a marathon
7. Fake product-market fit
Replies
Arun Kumar Kankipati@kankipati_arun
I have few more important things that tend to fail or break a startup.
Lack of Market Need
Poor Management Team
Product Issues (Key Component ~ Difference between Ideation and Visualization)
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@kankipati_arun Lack of market need is #3
Poor management is #1
Product issues is #2
I mentioned these points.
Haha LOVE that! Selling vitamins instead of pain killers!
@lisa_steingold1 Rookie question here! What exactly does this point mean? I'm being able to extrapolate the general idea around selling "bandaid solutions" instead of a product that really solves a problem for the user, but what's the true definition of this? Do you folks have any examples of what a vitamin vs. a pain killer looks like for certain customer segments?
DAMN, on point.🤯
SOOO RELATABLE.
"Vapourware starter kit"
Hi Olena, Marlee (where I work) has 25+ years of research on this.
Our Founder, @michelle_duval, studied the motivations of entrepreneurs and what we call 'business builders' to prove her hypothesis that there were 'XFactor' work style motivations that led to venture success.
The study found statistically significant differences in the attitudes and motivations of the highest performing entrepreneurs and business builders, contrasted with a sample of those who experienced business failure and bankruptcy.
The research was published, and that's what led to the development of Marlee's AI technology (which we just launched on Monday this week!)
To summarise the research findings for entrepreneurs:
- successful entrepreneurs are more motivated by what we call 'Big Picture Thinking'
- they're higher in personal or organizational 'Power'
- they trust their 'Gut Feel' more than the working population
- they're higher in 'Initiation', so they start things fast - they don't pause and reflect
- they're more motivated by 'Money', ie P&Ls, margins, forecasts, budgets etc
So, from your original list:
- you mention lack of energy and stamina and you're right - successful entrepreneurs are high in initiation. They start fast, fail fast and start again. They're resilient.
The good news is (shameless plug!) that Marlee holds the "secret sauce" to venture success.
Answer some questions on what motivates you (for free) and Marlee's insights help you develop to achieve your goals.
@michelle_duval @emily_willis1 Just wondering how does their research account for the entrepreneurs who fail the first or second time before they succeed? Are they counted as successful only or left out in the name of data integrity?
Thanks @emily_willis1 @ashtrac - in our research we included discrete data set of all businesses started failed (one or more), Succeeded (no failed businesses) and those who did multiple startups with some failed and successful. Our study was exploring the relationship between venture failure and success and the cognitive biases that correlate.
It's concise and gets all the points right! Thanks Olena, so it's easy to ask yourself the right questions.
I would love to get your take on Wingtap. I'm launching it today and I believe I would score negatively pretty high on those 7 points.
Asking the rest of the community as well!
A startup can fail for many reasons, such as how well it researched before building a product, the quality of the product, the UX and UI of the product, and how effectively it solves users' problems. There are many other factors as well. For instance, we are building a product for non-coders and non-programmers.
With the help of this product, they can build a website of any niche or a mobile app. Unlike Bubble.io they have prebuild templet within it but we do not have any. this tool will write fresh code line by line for your product.
Launching soon!
This set off an alarm in my head remembering all the different moments from this list in our start ups. thank you for the list!
Great Points Olena,
and I really like this one Selling vitamins vs pain killer
Launching soon!
Not fixing the issues instantly and getting issues piled up is one of the main problems for startups.
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40% fails because they run out of funding 😅
@sentry_co Why? The question is Why?
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@olenabomko Lets check the data. I was a bit off actually. it was 29% Startup failure can stem from various factors, and while percentages can vary based on different studies and analyses, some common causes include:
Lack of Market Need: Around 42% of startups fail because there's no market need for their product or service. This means they haven't accurately assessed or addressed a real problem or demand in the market.
Running Out of Cash: Approximately 29% of startups fail due to running out of money. This could result from overspending, miscalculating costs, or failing to secure additional funding.
Not the Right Team: Roughly 23% of startups fail because they don't have the right team in place. A strong and complementary team is crucial for navigating challenges and driving growth.
Being Outcompeted: About 19% of startups fail because they face stiff competition and can't differentiate themselves effectively.
Poor Marketing: Close to 14% of startups fail due to ineffective marketing strategies or failing to reach their target audience.
Ignoring Customers: Around 14% of startups fail because they ignore feedback from customers or fail to pivot based on market response.
Product Mis-timed: Approximately 13% of startups fail because they've launched their product or service at the wrong time, either too early or too late for the market.
Pricing/Cost Issues: Roughly 18% of startups fail due to issues related to pricing or cost.
These percentages are based on research and data from various sources and may vary slightly depending on the study and the specific industry or market. It's also worth noting that many startups fail due to a combination of factors rather than a single cause.
Launching soon!
@olenabomko Personally I think the most common reason for failure. Is The doom of complexity. Insufficient resources to deal with complexity. Especially post PMF. When you have customers. Things become extremely complex. So the sweet spot IMO. Is High utility, low complexity, delightful experience
Many startups fail due to founders' lack of experience, poor hiring decisions, and inability to pivot based on customer feedback. Successful startups solve real customer pain points, differentiate themselves, and treat entrepreneurship as a marathon requiring stamina and adaptability.
"Selling vitamins vs pain killers" - I'd say this is one of the most important reasons for failure, especially for SaaS
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Great points, @olenabomko
8. Not marketing enough, and putting all resources into getting a huge fancy office.
9. Running heavy ads, and not caring about the experience the customers would get when they finally land on their website through ads.
10. Bad experience on their website, content studio, and commerce. (Had to be said twice)
8. Conflicts among partners.
I think that many have optimistic expectations. 🤷♀️ They work on something (yeah, you know, that enthusiasm when you are done with the whole concept), you will push it publicly and you are waiting for that applause. But there is no applause because no one cares. That's the point when you started but these founders thought they actually finished.
I believe "people buy from people they like" and that hits me hard. emotional quotient in sales is also important!
These are great points but I think to improve, focus on building a strong, experienced team and create a robust feedback loop to quickly adapt. And also you've to check if your product genuinely solves a critical problem and maintain consistent, strategic marketing efforts.
Launching soon!
These are all reasons, but the major one is "developing a product in search of a demand, rather than addressing a specific consumer pain point."
Consumers need holes, not drills. To succeed in the market, a business should always address the consumer's pain points.
How do you know that?
@olenabomko I see. It may not be so important in this case, but I'd always give a source or justification for all assertions, in this age of misinformation and fake news.
BTW, could you elaborate on Selling vitamins vs pain killers and give example?