Monday, February 23, 2009

Here are my top ten reasons start ups fail.

1. They run out of money. Usually, they are too optimistic about when their product is going to be accepted by the market.

2. Founders don’t have complete faith in each other. They fight instead of delegate, trust and verify with each other.

3. CEO hires weak team members. Strong CEOs sometimes try to carry everyone with them rather than hiring people who stand up on their own.

4. They want to do too much. Usually, a successful start up figures out a narrow niche that they can dominate and then expands from there.

5. They go after too small a market.

6. They don’t charge enough from their customers to survive. These often think their vcs are their customers, and think that a nice sale is all they need to make to get more money.

7. They hire too many people up front. Too many mouths to feed too early can sink a company. Keep a low burn until you have your business model in place.

8. They get unlucky. Broadsided by competitors, new technologies, big companies changing direction, etc.

9. They don’t work hard enough or fast enough or smart enough. All those little decisions add up to an outcome. Awareness of the subtleties of their market dynamics, etc.

10. They don’t take enough risks. Some start-up entrepreneurs think that they should operate as though they are big companies. This is wrong. They will never beat Microsoft or Google at their own game. They must get creative and do things differently, even at the risk of embarrassment.

11 comments:

Ed French said...

I'd suggest an 11th reason: average cost of selling is too high: http://ensemb.li/1m

Jeffrey Summers said...

#12 - They're not different enough from everything else in their market.

#13 - Not enough value to mandate their prices.

Hal said...

I think most start-ups fail for the same reason good ideas fail. Check out this post:

Why Good Ideas Fail

Friend Connect Central said...

Interesting, in my experience the number 1 reason a start up fails is there is inadequate testing to validate the assumption the market wants what is being offered.

Second reason is the owners are in love with making money but not in love with offering value.

ckm said...

After advising 70+ startups, I only have three:

1. Not doing whatever it takes
2. Lack of focus
3. Not remembering you HAVE to exit

I've given a three-slide presentation about this a bunch of times, and most entrepreneurs are shocked, to say the least.

Vincetastic said...

Tim, this is an awesome top ten list, really great advice. I help run a startup http://www.toptentopten.com/ and we struggle with many of these issues. Please feel free to visit our site and add your list. The coolest feature is you can let other people vote on the rankings of your list.

asymptote said...

Great List.

Sort of tied into all of this is my big reason they fail:

Believing "if they build it, they will come" and not putting someone on the team that knows and can truly focus on sales. And then building the product in such a way that allows for sales in the short term and doesn't compromise your overall vision for the long run.

Eric said...

# 11. Hiring too many sales people too soon.

#12. CEOs who don't understand the market they're in.

Edward said...

Tim
I think one big reason is unqualified VC's trying to qualify what they were not trained in or understand.
How do you get around that?

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