Top 20 Reasons Why Startups Fail

We often hear about the success stories coming out of Silicon Valley… Uber, DropBox, AirBnB, etc. but did you know that approximately 75% of venture backed companies fail? According to a Statistic Brain study, 50% of all US companies fail after 5 years. CB Insights researched the top reasons why startups fail and here’s what they found.



The takeaways

  1. Tinker early and experiment with your product concepts, put it on the market and gauge the impact. Are people paying for your product/service? Is there a high rate of adoption? If yes, then great now build on that. If no, then iterate and try again. Pivot in a completely new direction if you must, but find a product/service that shows promise then double down. Don’t throw good money after bad. In other words, if there’s no product market fit don’t force it. Fail fast and keep it moving.
  2. Make Money. I’m a fan of bootstrapping businesses vs. taking a bunch of money you don’t really need. Having a ton of cash can be a gift and a curse. Build a revenue model into your business early on and reinvest that money into the business to grow. Once you’ve proven you don’t really need the money and you’re doing quite well on your own is when every VC will want to date you and lavish you with all kinds of nice gifts and cash (isn’t that how life goes ;-p). But I digress, develop a solid revenue model then take investor cash to expand more quickly if necessary.
    • There’s always exceptions to the rule. If you’re Instagram, Facebook or YouTube, with an alarming rate of adoption grab as much market-share as possible and worry about monetizing later. That’s only recommended if you’re experiencing exceptional growth.

That’s my take. What’s your experience been? Hit me on the Gram!