Most startups never get past the first year of operation. Founders blame investors; investors blame CEOs, CEOs blaming the R&D people; R&D people say the product is fine, the market just doesn’t get it, and marketing people blaming it all on the recession. These mistakes have proven to be the reasons for most startup failures.
- Inability or failure to obtain and/or maintain sufficient capital (for a variety of reasons), whether or not managed poorly.
- Not learning fast enough
- Management teams lack flexibility to change direction when needed.
- Focusing on technical development rather than on the customer. (4 Steps to the Epiphany)
- Founders make something not many people want
- Building products that cannot scale
- A lot of potentially good ideas/projects die because the founders quit
- Sometimes the market simply isn’t there, founders conduct little or no research
- Poor allocation of company resources and funds
- Inability to change your business model where necessary and especially when there is the need to do so
- Too much money can also creates undisciplined management decisions hence the failure. You risk spending your money too freely, shortening your runway
- Lack of trust and commitment in the founding team
- When you build something far more complex than it needs to be.
- Wrong timing
- Lack of long-term vision and plan, passion
- Raising money can sometimes be a HUGE distraction
- Incompatible team
- Bad hiring. Overly aggressive team expansion, and a high burn rate but no execution in product and marketing
- Not solving customer problems
- Co-founder/CEO who proves himself or herself overbearing, not valuing his partners
- Inability to market/sell, manage, iterate, adapt, scale, listen to users/team, handle mistakes and change
- Poor understanding of how to motivate people and create a happy workforce
- Sometimes startups fail because of unexpected external factors like economic downturn
- Trying to grow too quickly, scaling up too fast and without realizing that there are significant costs to scaling
- “All companies that go out of business do so for the same reason — they run out of money.” Don Valentine
