22 reasons for why a startup fails and how to avoid them
So, starting up a traditional high risk startup is really hard. Most companies fail pretty fast or sometimes very slow but painfully so. But there are a lot of different reasons to why they fail.
I’m trying to collect every reason why you can fail in a list, as knowing all the known reasons for failing might help you in avoiding them and thus succeed. Plain logic. Right?
“There is an art to flying, or rather a knack. The knack lies in learning how to throw yourself at the ground and miss. … Clearly, it is this second part, the missing, that presents the difficulties.”The Hitchhiker’s Guide to the Galaxy
1. Not committed enough
You don’t really really feel for the idea and don’t commit to it 100%. So the execution might be sloppy or you work too slow. Either way it will sink you idea.
Solution: Pick one project at a time, quit your day job, don’t do side hustles. I know it’s very hard.
2. Sloppy execution
You have a great idea but you implement it badly. Maybe the website design sucks or your code is so buggy you don’t get the chance to show your perfect idea to people before it crashes.
Solution: Don’t compromise and only work with people who are super experienced. Know what matters to prove your idea. Sometimes it’s design sometimes it’s code or it could be something else.
3. Your idea is bad
The idea is actually bad. Either you only get very positive feedback from people who tries to be nice or you don’t listen to the nay sayers that warn you. Your idea will never work. Find something else that will.
Solution: Test the idea thoroughly before committing to it. Be hard on your idea not on yourself.
4. The wrong setup
You started the company with your best friend who is really lazy or but so much fun to be around. Or you start a SaaS company targeting Fortune 500 companies but no one in the team have any experience or willing to make a sales call. Either way you need a better crew or another idea that better suits the team you have setup.
Solution: Think hard about what is needed to succeed and how you are going to accomplish that before starting up. Figure out what is important.
5. No real product/market fit
You have a great idea and people seem to love it. But they just think so. The proof is always in the numbers not what people say. If no one buys or downloads or signup. It’s not working no matter what people say.
Solution: Take time to get product/market fit right. Nothing is sacred until you do. Kill your darlings. Don’t start scaling before you find it.
6. Scaling up too early
You are so sure of what you have that you think you need to get it out to everyone. And when I say everyone I mean the world. Like Germany during World War II you try to launch your attack on every market towards everyone but with a small budget. You might not even have product/market fit yet. You will run into big trouble.
Solution: See No real product/market fit. Get that right before scaling up.
7. You didn’t raise enough money
You picked an idea where speed and muscles is crucial to your success but only raised enough to keep your company afloat for another 6 months. That won’t work at all. Make sure your budget matches your ambition.
Solution: If your idea is time limited (winning the metaverse) or resource intensive (sending rockets to space) then you need a plan for raising a lot of money as a condition for starting. There is no point otherwise.
8. You raised too much capital too early
You found something you really believe in and as a great sales person you managed to raise a lot of capital at a very early point increasing your burn rate enormously. Then you suddenly realize that the idea wasn’t right after all. You hadn’t really reached product/market fitness and you stand there with a heap of cash that you are burning through in the wrong direction.
Also getting another funding round can become a nightmare as everyone who invested previously suddenly see their share values drop.
Solution: Make sure you have product/market fit before overselling your idea. Don’t accept that much money in the beginning. It’s usually just not healthy.
9. You have too much focus on raising money
You think money solves everything. It doesn’t. But you spend so much time raising money that you forget about creating a product your users and customers want.
Solution: Only raise money when you have something really good that people will want to invest in. It should be a fairly easy sell otherwise you will just waste your time.
10. Unclear or bad branding
Yes. Branding might sounds superficial and not what will make it or break it for you idea. But getting it right can help you a lot. And getting it totally wrong can end your startup as it makes it confusing or untrustworthy in the eyes of the customer.
Solution: Take help from a professional. Don’t pay someone peanuts and think you will get anything but monkeys.
Also read: Don’t skip these steps when naming your product or company
11. Wrong target group
You have the right idea but the wrong target group for it. Make sure you notice this and react to it as early as possible. Go with the flow and change direction if that is what the customers are telling you.
Solution: Don’t be too stubborn about your chosen target group. Maybe you thought it would be hipsters but if every sub urban housewife loves your idea you should go with it. That’s what happened to Pinterest.
12. No initial user base
If you are doing something that relies on a network effect. Like a social network or marketplace. You need someway of starting it up artificially to make it work. Failing that and it will never take off.
Solution: Find a clear incentive in the beginning to participate. Create artificial solutions to the empty night club phenomenon.
Also read: When creating a product or startup think in stages
13. Starting up with the wrong incentive
OK, so to solve the no initial user base question you come up with an idea that will make people incentivized to participate. But the idea is so artificial that you forget that there still needs to be a product/market fit to your idea and you don’t have that when you remove the artificial incentive to participate.
Solution: Have a clear step by step plan for what makes people participate after you have your initial user base going.
14. You bet on the wrong technology
Maybe the problem wasn’t really about technology at all but you bet everything on the wrong technical solution that suddenly is out of date and it takes your idea with it.
Solution: Don’t get too attached to specific tech solutions and do some research before building your tech stack. Where is the world tilting going and will this work in 3, 5 or 10 years?
15. You think technology can solve the problem
A lot of startups are very tech focused and as the saying goes if you have a hammer everything looks like a nail. You try to apply technology to every conceivable problem out there.
Solution: Think about what the problem you are trying to solve really is about and then find the best solution to it. Not the best tech solution. Maybe you should start real life meeting group or a physical store.
16. Co-founder conflicts
Starting something up isn’t easy and it usually helps to be two, three or four people from the start. But as with all personal relations things can go wrong over time. Maybe you don’t want the same things or you notice that one of you gives a 100% and the other 50%. Or you had an uneven ownership setup that makes it unfair after struggling through the first years.
Solution: Be very picky when picking co founders and committing to something. Write a co founders agreement and a share holder agreement. Talk through different scenarios before they happen. Don’t be too many when starting up and make sure you complement each other with different skill sets and backgrounds.
17. You give up too soon.
It can be really tough succeeding with a startup. And there is very few startups that have had a clear path to success. Most have had some really rough times that they struggled through. Giving up too easily is one of the biggest hurdles to avoiding failure.
Solution: Don’t give up just yet. Try something else. Ask someone what they think you should do. Change things.
18. Bad user experience
You got the idea right but your interface sucks. No one understands it and it takes 10 clicks to accomplish anything.
Solution: Hire an expert and take some time to do things right. Think from a user perspective and test your own product.
Also read: Practice what you preach – and don’t forget to eat your own dog food
19. Not pivoting fast enough
The first idea is seldom the right one even if there is something there. To succeed you need to be fast in the beginning to adapt and change your idea, product, setup or target group. The fast you can the quicker you will reach your goal.
Solution: Work with a small but super experienced team that can move fast and try different things before scaling up.
20. Not learning from mistakes
If you do the same thing over and over and think it will give different results you are wrong.
Solution: Learn from what works and doesn’t work quickly and adapt.
21. You care more about looks than results
What people think of your startup matters more than how it actually performs. Sometimes those can be the same but sometimes they can be different. Especially for in-house startups where you can succeed with the internal company game while still failing with the startup experiment. Those are so called life style startups. Not creating a true business but just being about you and your startup.
Solution: Have clear goals set with clear KPI:s that you follow. Nothing else matters. Be honest to others and yourself. Don’t listen too much to what other people say about you.
22. You never start
You wait for the perfect moment to starting something but it never arrives. So you never fail because you never start.
Usually it’s not just one of the reasons above but a combination.
It’s not easy starting up.
Solution: Start today and go with the flow.
Also read: Don’t wait for the perfect time to start – there is no perfect time