About startup failures

Following my post of a few days ago “Ok, let’s pivot”, a colleague of mine sent me a link to this interesting article which discusses the reasons why startups fail.  If you are interested in startups, I recommend you read it.  It’s short and there’s definitively some value to it.

That being said, there are at least two issues with the analysis.  As the author states:

  • The sample size is quite small, 193 blogs.  (If you segment by funded vs. not-funded, the sample size becomes so small as to not being meaningful… and I would argue that this segmentation must be made… running a funded startup and running a bootstrap startup are simply different beasts and should not be compared).
  • The data was extracted from founders’ blog posts.  I am sure that most of these founders are not being disingenuous but it is possible that their closeness to the startup makes them biased.  (With a sample size this small, this potential bias might skew results).

Furthermore, I would add that the list of categories for failures are debatable.  I am unsure as to how those were set but my impression is that some of them intersect so much that they should simply be aggregated.  This is especially true of the “business model not viable” category.  If there is “no market need”, it might be because your business model is not valid.

That being said, if you consider the business model viability and what I consider its adjunct categories, it becomes apparent that you having a proper business model is of utmost importance.  Not having a good business model (and I would surmise, an associated business plan) is the major cause for startup failures.

Note that to have a good business model, you first need to have one! Good or bad.  So make sure you spend time defining your model! Make sure you have it reviewed again and again, by friends, family, mentors, potential clients, etc.  Get everybody involved in poking holes in it!  Refine it, iterate on it, etc.  This is applicable to both bootstrapped and funded startups.

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