Startup Failure

One statistic that I recently saw indicated that 3 out of 4 startups would fail. At first, I didn’t really understand why. In many cases, the issue listed was cash flow issues. After participating in several startups in different capacities, I have come to the conclusion that citing cash flow as the reason is a cop out. At the end of the day, management and direction issues were the real cause, with cash flow problems being an easy cop out.

What then, you might ask, are the reasons that start ups will fail? While not exhaustive, my observations indicate that one, or a combination of the problems listed below most likely are the real cause for a start up to fail.

Constantly Expand Your Product: Admittedly, founding a new business is an exciting prospect. There seems to be almost no limit to the possibilities ahead of you. However, you need to focus on promoting your Minimum Viable Product (MVP), and not focus on making things more elaborate and complicated. Too often, things keep getting bigger and bigger without focusing on what got you here in the first place.

Unclear Path Forward: What is your plan to grow over the next five years? Admittedly, at the start up stage, there can be some creativity here, since there might be multiple paths forward. However, once a clear path emerges as a legitimate possibility, start developing a path forward with this in mind. This stage needs to be organic, gradually growing longer and more detailed as you build it and let things flesh out. Unfortunately, in start ups that fail, this type of planning doesn’t happen. I would almost argue that the founder is hoping things fall into place or that they will know what to do when they see it. Unfortunately, neither scenario happens.

Failing to Listen: Successful Startups require a team. While there needs to be a clear leader, you need a team that possesses the skills required to found the company. In order for this to work, people need to listen to team members that possess skills that they do not. Some Startups that I have been a part of that never went anywhere had leaders who would not listen or would ignore the advice much to their detriment.

Failing to Learn: No matter how hard you try, the Laws of physics cannot be altered. An apple will always fall down, just like the Law of entropy states that everything will go from order to disorder. The same is true with issues facing Startups. Unfortunately, businesses, laws, etc. operate in a specific manner. It isn’t magic to get things to happen, but too often, some founders think that things will magically work out. Learn how things work instead of hoping everyone lives happily ever after.

At the end of the day, it is very easy to see how any one or all of these things can cause a startup to derail entirely. The reason that Cash flow failed had to do with falling into one or all of these traps instead of focusing on promoting the product.

If you want your Startup to succeed, focus on developing your MVP and getting it into production as soon as possible. That needs to be your focus. There will be a time to expand your offerings. If it helps, schedule additions and upgrades using an easily achievable plan (think in terms of years into the future as opposed to days or weeks.) As soon as you can start selling your product, the more likely you are to succeed. While profitability might take a couple years, this will be expedited by getting your product to market as fast as possible.

Maybe a better analogy would be using the Ready, Fire, Aim approach. Too often, people spend too much time thinking as opposed to execution. While strategy is important, with a Startup, time is a very expensive luxury that thinking can use an inordinate amount of. You will always have time to revise and improve your product. The problem is if you take too long getting it to market, you might run out of cash to get there.

In conclusion, the four areas listed above boil down to indecision and lack of direction. Founding an organization is seldom a thing of beauty, with quite a few starts and stops along the way. Things will get messy, and change of plans will likely be the norm, but if your focus is to get your product to the public as quickly as possible, Startup Failure will not happen to you. Best of all, this focus on getting your product to the public at the outset will translate into your longterm corporate culture.