101 startup failure post-mortems were gathered by CBInsights.
Prime Question: Are there a few primary drivers of startup failure?
(A note: I think CBInsights is the freshest source of outstanding startup facts and figures for new enterprises and their stakeholders.)
(And a big thanks, very much, to the entrepreneurs who shared their thoughts and souls. That takes courage – and helps all of us.]
CBInsights’ finding: No one driver dominates, there's no easy thing to focus on to win (survive).
“So we gave those post-mortems the CB Insights’ data treatment to see if we could answer this question. And so after reading through every single one of the 101 postmortems, we’ve learned two things. One – there is rarely one reason for a single startup’s failure. And two – across all these failures, the reasons are very diverse. And so after sifting through these post-mortems, we identified the 20 most frequently cited reasons for failure.”
Wow, no single thing? So what good is the information?
I have a couple of suggestions for you (below), but first take a look at The Top 20 graphic:
Do you see a pattern? A single dominant killer?
As for lack of cash, that’s a consequence, not a leader. Other actions result in lack of cash, or uninterested investors, or investors stepping in to run the startup. Something broke, went badly wrong.
If anything, I see Marketing (capital M, a very big circle) as the most mentioned area to think about.
So where to start?
Allow me to point to a couple of things that can help you make practical use of this revealing research.
TIME: IT’S A PROCESS
Doing a startup is a process. A march to IPO.
Along the way you’ll be creating, adding elements to build your business, to construct your unfair advantage.
Thus each of The Top 20 become relevant and important at special moments of time as you march along the trail to IPO.
ALL THE PIECES: EACH POPS UP WHEN VITAL
Think about a startup like an engine. You need all the pieces working well to have your engine working well. If one begins to fail or breaks, your engine begins to run poorly, or even stops. Same with startups.
Now think about unfair advantage, that holy grail sought after by founders determined to lead their startups to amazing success.
Unfair advantage is composed of many elements. When one breaks, your unfair advantage breaks. Like your human immune system, when it breaks, bad things arrive and make you very sick, may even kill you.
Thus, each of The Top 20 becomes important at some time to you as you proceed to build your startup’s unfair advantage.
And each building block – such as your initial core team of a half dozen people – must be solid, working well, because the next elements depend on it. Rotten foundations end up with the building collapsing. That explains why there is no "primary driver of failure". At the right moment, any of The Top 20 could cripple a new enterprise.
Hopefully, as you make progress your unfair advantage grows, your launch is successful, and you grow financially healthy.
Your Prime Objective is to battle your way through the competition to emerge from the fray as the company dominating a new market segment (category). By then your finances should be in good health, your company growing as fast as you could hope for, and the competition left in the dust as you head for IPO.
Talk to startup people to learn the truth about startups.
Startups are an apprenticeship – you learn them by doing them. Why not learn from the errors and great moves of other entrepreneurs? “Experience is cheapest second hand.” Yes, it takes time. Yes, it’s how serial entrepreneurs became successful. So can you.
So do it. Start making contacts and keep going. And be ready to share your own experiences (“spill your guts”) with others, that’s the price of admission to this private school.
BOTTOM LINE: Each of the Top 20 reasons for startup failure are important. At some time, each pops up as vital to do well as you move along the process of building an unfair competitive advantage. Learn from others which pieces you’ll need, when they will be required and how to do them well. Together they are the elements you’ll need to creatively build your unfair competitive advantage. Others have done it, so can you.
I wish you The Best on your Adventure!