“The Top 12 Reasons Startups Fail”

Originally posted in our July 2022 Top of Mind Newsletter.

Startups are often seen as risky, requiring significant time and monetary investment to get going. While that’s not an entirely false perception, we at ELI have found that there is much more we, as educators and entrepreneurial support workers, can do to prepare someone for the trials of starting a fledgling business.

In this piece from CB Insights, we see the top 12 reasons (by their metrics) that startups fail. The insights are useful in their own right, but in aggregate, they also tell us something about the continuing trends of startup culture. The presupposition of essentially all of these points is that the founders received or sought capital investment from venture capitalists.

For those who have followed ELI for a while, you know that we do not focus on helping entrepreneurs get funded by VCs. Instead, we support a client-funded approach to building a venture. This is partly because of the very failings this CB Insights article points out. When a founder can get their startup off the ground, only to find that there is no market need (note that this is the #2 reason for failure, according to the article), they weren’t practicing enough of what we call entrepreneurial discovery.

As some have said, fall in love with the problem you’re working on, not your solution. Said another way, kill your darlings. This maxim is especially true if you want to start a business or other venture serving others. If the end user isn’t your first concern, the deck has now been stacked against you. Spending more time in the discovery and testing phase while engaging with real possible stakeholders is a surefire way to guard yourself against the type of failure highlighted in this article. From the research you do here, you’ll be able to develop a truly minimally viable product and get honest feedback and engagement from your stakeholders.

Hat tip to ELI facilitator Tom Ledbetter for sharing this insightful piece with us.

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