This post answers a lot of questions for me about why so many startups fail, something I have recently blogged about.

The number is over 80% but many have it higher.

I think Jonathan Teo was closest to where I sit in his discussion about value. Yes, that’s a big thing, you have to create value around a problem that people have a powerful desire to solve such that they will pay an amount that makes you profitable. Yup that’s really the game. The rest seem to be highlighting raw ingredients such as people and passion while others talk about numbers in the context of funnels, traction and user metrics.

I encounter a number of founders of funded startups and while I absolutely love almost all of them, I can see right away that they just won’t make it. And I feel like I’m the guy with the secret. All the things discussed here are relevant but what I don’t hear enough of is something along the lines of critical success factors ie under what conditions will the company be able to hit the desired growth metrics.

I seriously hesitate to call out a specific company so maybe I’ll use an industry. Let’s say an online hiring platform. In my mind it’s almost impossible to be successful with one now because the marketplace has matured and there are a number of scaled options to exhaust first. Still, companies will tell you that they are open to finding awesome communities where they can poach talent, so we’re convinced there’s a need.

But there is a major problem. You’ll have trouble attracting companies because they can’t be bothered with you until you have a million users (top notch users, which is a whole other issue for longevity) or more. And job seekers won’t sign up unless they know you have 200 companies on board looking to hire you. It’s a stalemate that nowadays will go nowhere.

Sure you’ll get a few of each cohort and you’ll think you’re having success. But, you’ll quickly hit a wall once you have tapped into your low hanging fruit of customers, while word of mouth spreads that there is no matching happening. And it’ll end.

So…despite all your passion and funnel metrics you will NOT make a go of such a company unless you have an incredibly insightful plan to work around this problem. Failing that, you’re cooked. The main way to address it is to create a community around a companion problem to job hunting/careers. Let users showcase their abilities and rate each other so that the cream becomes obvious. Then once you have a million (active)users in this little ecosystem you turn to B2B as version 2.0 (or 3.0 or 4.0) of your platform.

Yet, I see hiring platforms raising money. Yay for them — really — but I don’t get it. This is what I mean. You have to be crazy insightful to zero in on what exactly it will take to succeed. And, many of those insights revolve around customer perceptions and behavior.

When permitted, I call some of these must have’s out as diplomatically as I can, and then the answer that comes back is usually “well my investors didn’t ask about this” or “I have advisors who don’t bring this up” and I’m dismissed. And my thoughts are “yeah but you as a business person should be all over this, because right now you’re headed for a problem”

I’m not trying to paint a picture of me being the only one with insight because that’s not at all the case. But I’m not yet confident that the entire startup ecosystem has fully matured to be able to collaborate for the sake of delivering better returns. As I have blogged about, I hope we get better hit rates before investor money starts to dry up, because the startup space is an otherwise energetic and inspiring one. And I want everyone to win.