Team: why startups endure or die
Without a good team, there’s no light at the end of the tunnel
On his many failed experiments, Thomas Edison once said
I have learned fifty thousand ways it cannot be done and therefore I am fifty thousand times nearer the final successful experiment.
I love this section of CB Insights about startup failures. It is honest, full of lessons and gives me a lot of hope.
Doing some number crunching they learned that startups usually die 20 months after raising financing and after having raised about $1.3 million.
But before getting to the reason why startups fail, let’s look at why startups succeed. Bill Gross, the founder of Idealab, a startup incubator, analysed over 100 startups over 20 years and presented the findings in a TED talk titled the single biggest reason why startups succeed. Timing came first as it is “timing [that] accounts for 42% of the difference between success and failure. Team and execution came in second, and the idea, came in third. … The last two, business model and funding.”
So timing, team, idea, business model and funding.
According to CB Insights, lack of product market fit is the single biggest reason why startups fail. In a poll, 42% of startups cited this as the main reason for their failure.
Steve Hogan of Tech-Rx argues that running out of cash is actually a symptom of another element in this list, especially team issues.
I would argue that the reason most startups fail is due to team and human elements. Looking at the list above, you can group 13 of the 20 into team:
So timing, funding, team, team, team are the reasons why a startup fails.
Neil Patel argues that if you have a fast growing startup, you can effectively bypass some of the biggest startup killers — losing to the competition, losing customers, losing personnel, and losing passion. This could be the case in some startups but I doubt that it works well. You would want your happiness to grow with the business you’re building and the community you’re serving, and just fast growth may not serve all at the same time.
It goes back to the team, the integrity and honesty of the founders who set the company culture and are upfront with each other from day one. They know their limits and know how to push themselves to go beyond as they are doing it for a purpose.
In our opinion, the single most reason why a startup succeeds is the team and the team cannot function well together unless they have a common purpose. Everything else, choice of time and product, is up to the team. The team knows that a big part of success is luck and should position themselves to become lucky. This is another way of interpreting Bill Gross’ findings, that timing is no different to luck.
This is the third in a series of posts about our investment portfolio companies which was also posted on LinkedIn. We’d love to hear from teams with crazy (but commercial) startups. Get in touch or attend our breakfast series. Finally, don’t forget to get your IV Score or talk to our FundingBot to prepare for your next VC meeting.
