Why Do Startups Fail?

Warning Signs for When You Should Get Out!


As an entrepreneur, I’ve found myself in successful and unsuccessful companies. Most startup founders have had their fair share of entrepreneurial heartbreak, and there are many lessons to be learned from those situations. We often talk about how to optimize your company or improve marketing/sales, but what about when it’s time to jump ship? How do you know when you should just fold or if it’s worth pushing on? From my successes and failures combined, here is what I’ve learned about failing startups.

Three Reasons why Startups Fail

1. When a company makes a product that doesn’t solve real problems by real people. The failing element here comes out when trying to find early adopters and market fit. If there is no real need for the product, then the company will struggle to find users. And without users, there’s no funding, and without funding, well you get the point.

2. Sales. When there is no early on sales strategy, startups can tank. It’s important in the beginning of a startup to have a small group of interested users. While you might think getting as many people as possible to download your app is the best strategy, you may never get feedback in order to improve your product. Selling your product to a few industry-related users will ultimately grow your product, as you’ll create a great product for people who actually want to use it.

3. If the partners don’t share a vision for the company, things start to go downhill. When partners start to disagree on the future of the company, and no agreement can be made, it’s usually best to go separate ways. This can create a bad working environment for employees and lead to a decrease in morale. A startup life is stressful, so you want people to want to come to the office, not dread it.

When to Walk Away

Sometimes you have to walk away from one company to invest more time in another. This happened to me and members of my team once Wideo took off; other projects fell to the side. That’s the best reason to leave a company. The worst comes when founders disagree or can’t work together. In that case, no matter how good the idea is, if it can’t be executed with a functional team, it probably won’t take off. The last reason to walk away is if your product and/or team can’t adapt to change. This technological market is constantly changing and evolving, so your product must to, and if it can’t, then the likelihood of success is low.

Of course every company is different, but knowing when to get out of a company is just as important as pushing it forward.