7 Most Common Causes of Startup Death You Probably Should Avoid
Ah, startups.
As a data lover I decided to read CB Insight’s “156 Startup Failure Post-Mortems” and categorize each one of them (…and put it all into a nice chart of course).
The results may or may not surprise you.
7 Most Common Causes Of Startup Death
1. No Product/Market Fit (28.2%)
This is where the founders would either build something and find no users or would try to build a business before having a product that users love and share.
After seeing this it was no surprise YC’s first advice is “build something users love.”
It is also no surprise Marc Andreessen calls product/ market fit the “only thing that matters for a new startup.”
2. Wrong Founder(s) (27.6%)
Founders are the second most common cause for startup death.
Either they give up too early, or they couldn’t execute their original vision (their goals were too high), or they didn’t know how hard it would be.
Sometimes failure comes from lack of experience with running a business.
Sometimes it’s a simple case of divorce where two founders just couldn’t work together. Which is why YC looks for people who’ve known each other for a long time before creating a business together.
Gary Vaynerchuk thinks it’s crazy everyone believes they can run a startup. He even compares it to playing for the NBA (not everyone believes they can play professional basketball so why do they all think they can build the next Facebook?).
3. No Cash (16.7%)
Cash is king. And a merciless one.
Either people couldn’t raise funding or they couldn’t cover costs.
Which reminds me of Airbnb’s founders selling cereal (Obama O’s!) in the early days to cover costs. So entrepreneurs have many ways of solving cash problems by being creative (I’ll be writing more on this later).
4. Wrong Strategy (16%)
These are simple strategic mistakes. Such as doing a web app in a mobile world, or depending on a single platform (Zynga plummeted when Facebook took a stand against game notifications).
A lot of times it’s simply because the founder(s) didn’t adapt to a changing world.
5. Legal Issues (5.1%)
Yes this does mean the startup died because what they did was illegal (Napster).
What surprised me though was finding out about companies out there that will sue your startup only to make you run out of money. Evil.
6. Competition (3.8%)
Very very few startups die of competition. This is why YC companies are recommended not to focus on their competitors.
The startups that did die because of competition were targeted by companies like Uber, Facebook and Google.
7. Poor Hiring (2.6%)
Although a small cause for startup death. Hiring the wrong people can kill you.
You can always do like Airbnb’s CEO Brian Chesky and ask people if they’d still work at your startup if they had a year left to live ;-)
I really hope this helps.
And remember;
“Learn from the mistakes of others, you can never live long enough to make them all yourself.” — Groucho Marx
P.S. My post caught the eye of the wonderful people at ART + Marketing . I’m happy they liked it enough to share it on their publication. Check them out!
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