We all know the success stories of Facebook, Airbnb, Twitter and Uber.
But only 5% of startups are successful.
In a detailed review of over 2000 startups financed with venture capital reveals that more than 95% of the startups fail to see return on investment. And 40% of US startups liquidate all assets, with investors losing all their money.
Startups fail according to the study because the old management methods of a good plan, a solid strategy and thorough market research don’t work for startups, as they operate with too much uncertainty. An analysis shows us the top 20 reasons why startups fail.
Insufficient market need . . . . . . . . 42%
Ran out of cash . . . . . . . . . . . . . . 29%
Poor management team . . . . . . . .23%
Beaten by competitors . . . . . . . . . 19%
Price/cost issues . . . . . . . . . . . . . .18%
Poor product . . . . . . . . . . . . . . . . . 17%
Poor/no Business model . . . . . . . .17%
Poor marketing . . . . . . . . . . . . . . . 14%
Ignore customers . . . . . . . . . . . . . .14%
Product mistimed . . . . . . . . . . . . . .13%
Lose focus . . . . . . . . . . . . . . . . . . .13%
Disharmony with investors . . . . . . 13%
Bad pivot . . . . . . . . . . . . . . . . . . . .10%
Passion fades . . . . . . . . . . . . . . . . .9%
Poor location . . . . . . . . . . . . . . . . . .9%
No investor interest . . . . . . . . . . . . 8%
Legal issues . . . . . . . . . . . . . . . . . . 8%
Did not use advisors . . . . . . . . . . . .8%
Burn out . . . . . . . . . . . . . . . . . . . . . .8%
Failure to pivot . . . . . . . . . . . . . . . . .7%
There is seldom only one reason why start-ups fail, this is why the list exceeds 100% The main reason though why startups fail, is that the founders have a ‘big idea’ and come up with a so-called solution for something there is no market need.
A successful start-up needs three ingredients:
Insufficient market need . . . . . . . . 42%
Ran out of cash . . . . . . . . . . . . . . 29%
Poor management team . . . . . . . .23%
Beaten by competitors . . . . . . . . . 19%
Price/cost issues . . . . . . . . . . . . . .18%
Poor product . . . . . . . . . . . . . . . . . 17%
Poor/no Business model . . . . . . . .17%
Poor marketing . . . . . . . . . . . . . . . 14%
Ignore customers . . . . . . . . . . . . . .14%
Product mistimed . . . . . . . . . . . . . .13%
Lose focus . . . . . . . . . . . . . . . . . . .13%
Disharmony with investors . . . . . . 13%
Bad pivot . . . . . . . . . . . . . . . . . . . .10%
Passion fades . . . . . . . . . . . . . . . . .9%
Poor location . . . . . . . . . . . . . . . . . .9%
No investor interest . . . . . . . . . . . . 8%
Legal issues . . . . . . . . . . . . . . . . . . 8%
Did not use advisors . . . . . . . . . . . .8%
Burn out . . . . . . . . . . . . . . . . . . . . . .8%
Failure to pivot . . . . . . . . . . . . . . . . .7%
There is seldom only one reason why start-ups fail, this is why the list exceeds 100% The main reason though why startups fail, is that the founders have a ‘big idea’ and come up with a so-called solution for something there is no market need.
A successful start-up needs three ingredients:
- a relevant market need (ideally a painkiller and not merely a vitamin - thanks Jerry Engel)
- a feasible simple solution and
- a viable business model.
The way to get things done is not to mind who gets the credit for doing them.
Have a successful, healthy and profitable day.
Bob Pritchard