9 reasons why most startups fail

9 Reasons why most startup fail

Interesting article of Steve Tobak on Entrepreneur.

Steve is always very keen on his analysis: I found it a very interesting article for our blog and I love to share with you.

“I’ll never forget my first IPO. The story is as old as the hills of Silicon Valley: It was a great ride … until it flopped. Our primary business was crushed by an 800-pound gorilla and we didn’t have the wherewithal to pick up the pieces and make a go of it. C’est la vie.

I’ve always been a big fan of learning from failure, so while most of my high-tech brethren like to talk up their successes, I try to help startups avoid catastrophic failure and get to the next stage. I say “try” because, while some make it, most don’t. That’s the nature of the beast.

In any case, I have a pretty unique perspective on what tends to trip up founders. Here are nine ways I’ve seen startups fail time and again.

Their entrepreneurs live in a vacuum. It’s easy for entrepreneurs to become so focused, so wrapped up in their own vision, that they lose perspective. That’s actually one of the key benefits to seeking venture capital from firms that know your target market: they give you feedback and validate your strategy.

Their idea doesn’t uniquely solve a big problem. Contrary to the old line, “Everything that can be invented has been invented,” the more complex the world becomes, the more problems there are to solve. That said, it’s got to be a big problem and a way better solution than what’s already out there.

They run out of cash. For every founder that manages to bootstrap a startup, there are dozens, maybe hundreds that run out of cash for any number of reasons: they don’t want to give up a piece of the pie, they don’t budget properly, they don’t plan for how long it takes to raise rounds of funding, their burn rate is too high, or some combination thereof.

They invent concepts, not complete products. Ideas and inventions are fascinating, but consumers and businesses generally buy complete products they can actually use. There is a world of difference.

There are big gaps in the strategy. There’s an old cartoon of two scientists at a blackboard filled with equations. Right smack in the middle it says, “Then a miracle occurs …” Some gaps are to be expected, but oftentimes, what startups leave to be fleshed out later – little things like low-cost materials, availability of components and infrastructure – end up becoming showstoppers.

The team does not have what it takes. Some founders just can’t get along. Others fall apart when the initial strategy fails, as it often does. Still others are out to make a quick buck and aren’t committed to working day and night over the long haul. Any VC will tell you, a big part of what they invest in is the management team.

Competitors with existing solutions don’t give up so easily. From disk drives and CMOS chip technology to pencils and paper, there are barriers to topple the status quo and, sometimes, old-school solutions that are tried and true and the powerful companies that market them hang in there far longer than anyone would expect.

The market moves on them, or moves in an unexpected way. Markets are a complex phenomenon with lots of moving parts that are difficult to predict. Moreover, some entrepreneurs simply don’t think ahead. As the great Wayne Gretsky once opined, “I skate to where the puck is going to be, not where it has been.”

They listen to bad advice from the wrong people. With all the hype over entrepreneurship, the quantity of information has gone way up while the quality has gone way down. That means entrepreneurs are getting lots of bad advice from unqualified sources. The worst thing about it is, when they actually get good advice that conflicts with what they’ve been told, they don’t recognize it for what it is. Sad but true.

Perhaps the most important advice I can give you is this: If your startup fails, it’s worth spending time to understand what went wrong. That’s the only way you’re going to improve the odds of making it next time. And, yes, there will be a next time. Hopefully this list will help you avoid a different pitfall.”

Steve Tobak

Boo.com: so many lessons from this failure

Boo.com Logo

Unless we raise $20 million by midnight, boo.com is dead

So said boo.com CEO Ernst Malmsten, on May 18th 2000. Half the investment was raised, but this was too little, too late, and at midnight, less than a year after its launch, Boo.com closed. The headlines in the Financial Times, the next day read: “Boo.com collapses as Investors refuse funds; Online Sports retailer becomes Europe’s first big Internet casualty”.

The boo.com case remains a valuable case study for all types of businesses, since it doesn’t only illustrate the challenges of managing E-commerce for a clothes retailer, but rather highlights failings in E-commerce strategy and management that can be made in any type or organization.

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Blockbuster, Netflix and DVD rental: who better reinvents themselves survives


60 million members, points of sale in 25 countries, with 4,800 stores in the U.S. alone. The figures are exorbitant, gob smacking, yet even these incredible figures didn’t save Blockbuster from bankruptcy.  Because, if you are not capable of evolving and keeping up with the times, even if a giant you can fall.

But first things first, let’s go back to 1985 when in Dallas, Texas, Blockbuster opened its first store.

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What does $20 million burning smell like? Just ask DigiScents!

ISmell Digiscents

A particular idea, which raised $20 million in funding to create a product that was never released on the market: today i want to tell you about DigiScents and its iSmell.

The concept behind the project by Joel Lloyd Bellenson and Dexster Smith was, no doubt about it, fun: to recreate smells and perfumes through a device connected to the PC. Let’s go back to 1999 when, during a holiday in Miami, the two partners, amazed at the variety of perfumes, scents and essences that could be perceived on the beaches, began thinking of a way to store and reproduce these olfactory experiences in different contexts.

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Turntable, when Plan B is better than Plan A


September 10th, 2013, from the Turntable blog: We love interacting and DJing with our community. Turntable is incredibly important to us (…). We aren’t trying to kill it, you are watching us fight for it.

November 22nd, 2013, from the Turntable blog: As much as we all love turntable.fm, we have decided to shut it down to fully concentrate on the Live experience.

Now that’s consistency for you.

For once I will not be speaking about a startup that completely failed, but a project created with one goal that then ended up focusing on another.

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Keychains and condoms, what about market research?

Condom and keyrings

While surfing the web I stumbled upon a very curious story that, despite its peculiarities, or perhaps because of them, has a lot to teach us about startuppers.

We must go back to the late 90s, when Stanford Magazine published an article by one of its former students, Robert L. Strauss, who in the eighties, in defiance of his MBA in General Management and MA in International Economics, saw the birth, and shortly after the death, of what he considered to be the idea of the century.

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Even Google Can Fail: goodbye Google Reader

Google reader closed

“We launched Google Reader in 2005 with the aim of making it easier for users to find and retain their favourite websites. Although the product enjoyed a loyal audience, over the years its use has declined. That is why, on July 1st, 2013, we will be withdrawing Google Reader”- Google, March 2013.

There are two schools of thought about Google’s decision to abandon the old RSS aggregator, which has never been as successful as anticipated: The first is that this is the absolute worst thing that has ever happened on the Internet. And the second is: Who cares?

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Burning $5.5 million: Wantful, the startup for personalized gifts

Wantful shutted down the business

It wasn’t long ago that we heard the news about the closure of Wantful: the American startup created in 2011 by designer and entrepreneur John Poisson, which proposed the ambitious goal of revolutionizing the world of e -commerce and gifting.

But what exactly ended his run is still unknown to most people.

Thanks to an innovative navigation system, the company based in San Francisco and New York could advise their web surfers about what would be the most appropriate gift, analyzing information, the gender, tastes and preferences, of those who would receive them.

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