David Feinleib from venture capital firm Mohr Davidow Ventures recently published a great post about why some startups fail. He answers that they fail because they run out of money.
But then he develops it a bit further, listing a number of points that get them there. In this post, I’ll be quickly listing them here with my thoughts on each one, and then let you read the details over on his blog.
The main reasons he mentions are the following:
- They spend too much on sales and marketing before they’re ready: I couldn’t agree more with this point, many people launch with a half-baked product, mainly in an attempt to be the first-to-market with the idea, and they start promoting the product heavily and sending out people to sell, when the product wasn’t ready enough to be sold.
- The startup doesn’t move fast enough and is outpaced by the market: This is very true too, it’s somehow the opposite of the first point, where the startup takes too long to launch their product, or they fail to keep up with the market developments; it’s a very thin line and big balancing act.
- The entrepreneur behind is unable to take the idea and transform it into a well defined product: Whether we like it or not, not everyone who launches a startup is an entrepeneur and has the necessary energy and commitment to make it work.
- The market takes too long to develop: This is a risk every entrepreneur who launches a new idea faces; the idea might be perfectly awesome, but still it might take just a bit more to develop than the startup is able to hold on; leaving the big win for someone else who launches later on or for someone who can manage to hold on that bit longer.
- Risky Business: Well every business has a percentage of risk built in to it, some more than others, and depending on how much research and planning went into it; In the end it’s really up to the investor to decide how much risk he is willing to take.
Read the full post here: Why Startups Fail