What Kills A Startup?

Published on: Jun 16, 2016
Entrepreneurship Campus

By Entrepreneurship Campus

What Kills A Startup?

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Often times we only consider the factors that lead to the success of a startup, however these are the common factors that we may often overlook that lead to the failure of startups:

1. Being inflexible and not actively seeking or using customer feedback

Ignoring your users is a tried and true way to fail. Yes that sounds obvious but this was the #1 reason given for failure amongst the 32 startup failure post-mortems we analyzed. Tunnel vision and not gathering user feedback are fatal flaws for most startups. For instance, ecrowds, a web content management system company, said that “ We spent way too much time building it for ourselves and not getting feedback from prospects — it’s easy to get tunnel vision. I’d recommend not going more than two or three months from the initial start to getting in the hands of prospects that are truly objective.”

2. Building a solution looking for a problem, i.e., not targeting a “market need”

Choosing to tackle problems that are interesting to solve rather than those that serve a market need was often cited as a reason for failure. Sure, you can build an app and see if it will stick, but knowing there is a market need upfront is a good thing. “Companies should tackle market problems not technical problems” according to the BricaBox founder. One of the main reasons BricaBox failed was because it was solving a technical problem. The founder states that, “While it’s good to scratch itches, it’s best to scratch those you share with the greater market. If you want to solve a technical problem, get a group together and do it as open source.”

3. Not the right team

A diverse team with different skill sets was often cited as being critical to the success of a starti[ company. Failure post-mortems often lamented that “I wish we had a CTO from the start, or wished that the startup had “a founder that loved the business aspect of things”. In some cases, the founding team wished they had more checks and balances. As Nouncers founder stated, “This brings me back to the underlying problem I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.” Wesabe founder also stated that he was the sole and quite stubborn decision maker for much of the enterprises life, and therefore he can blame no one but himself for the failures of Wesabe. Team deficiencies were given as a reason for startup failure almost 1/3 of the time.

4. Poor Marketing

Knowing your target audience and knowing how to get their attention and convert them to leads and ultimately customers is one of the most important skills of a successful business. Yet, in almost 30% of failures, ineffective marketing was a primary cause of failure. Oftentimes, the inability to market was a function of founders who liked to code or build product but who didn’t relish the idea of promoting the product. The folks at Devver highlighted the need to find someone who enjoys creating and finding distribution channels and developing business relationship for the company as a key need that startups should ensure they fill.

5. Ran out of cash

Money and time are finite and need to be allocated judiciously. The question of how should you spend your money was a frequent conundrum and reason for failure cited by failed startups. The decision on whether to spend significantly upfront to get the product off the group or develop gradually over time is a tough act to balance. The team at YouCastr cited money problems as the reason for failure but went on to highlight other reasons for shutting down vs. trying to raise more money writing:

The single biggest reason we are closing down (a common one) is running out of cash. Despite putting the company in an EXTREMELY lean position, generating revenue, and holding out as long as we could, we didn’t have the cash to keep going. The next few reasons shed more light as to why we chose to shut down instead of finding more cash.

Source / photo: The Asian Entrepreneur 

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Comments (5)

togeda

7/14/2020Reply

In deed this is a learning ground. the motivation, encouragement, articles to help us focus and not make mistakes and those that fuels us to continue is just too wonderful. Starting a business may be an amazing experience, but sustainabilty may not be achieved as it is seen in the society if certain factors are not taking into consideration. For us to live the vision of this competition the writer of this article has open our eyes the things that kill star ups. There are listed as:
1. Negleting customers concerns
2. Solutions not targeting market but looking for problems
3. lack of the right team
4. Poor marketing and lack of cash

eduheal

7/13/2020Reply

I deally each campus member should read this article to enable be aware of things that can make our start up fails. One important thing i have gotten is market research. going from the ideas i have read I have equally discover that some of us build apps wether thinking if it is what the market needs. For some of us i have been able to request them to do a market research and for some I just ask them to read up the courses and if necessary the blogs. This article will help us a lot campus members.

kabige

6/29/2016Reply

That’s true and it’s good as reminder. And also the leadership use by the entrepreneur will determine the success of the business.. meaning that he has to have a great capacity to lead his team and put the business in the bigger picture.

martinsfene

6/25/2016Reply

I could sum up these causes to the logistic principle of theory of constraint (TOC), which says that in every organisation or process, there is or will be a constraint. Yet the question is not the presence of the constraint but rather the location and function of the constraint on the process. By logic, once the constraint is identified, then the problem should be addressed. But thus this really resolve the problem permanently or say on a long term basis? I will say no. Often we fail to realise that as we improve the process constraint, then we are also introducing other problems at the extreme ends. Take for example a surgical theatre which is thought of or seen as under performing in terms of surgeries per day, and so management puts in efforts to improve the situation. But without addressing for example, the capacity of the recovery room (machines, staff/skills, space, etc), there will always be a new constraint at the other end.
I like to share a story of a friend who had a very good concept running and approved but had to quit from his activities because he could not manage the overwhelming demand for his product.

Lesson: when we try to find solutions to problems, lets also research further what potential problems our solutions could bring about.

adeyinkaisioye

6/24/2016Reply

Hmmmmmmm….scary…yet invigorating

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