3 Reasons Your Startup Will Fail

Once you’re past the incubation stage, it’s a whole different game.

There are a lot of challenges facing startups as they begin to adapt their process to match their company’s growth. Failure to address even one of these three critical issues can take down your entire company — even if your business is strong:

1. OVERCONFIDENCE. There are many variations on this theme — unrealistic company valuation, shortsightedness, defensive or emotional reactions to constructive feedback, and resistance to change.

It all boils down to where confidence crosses the line into hubris. This happens when you’re too emotionally involved with your business to step back and realistically assess a situation. Passion is part of entrepreneurship, but being a businessperson requires keeping a level head in tough situations and making decisions based on cool assessments of reality.

[Image via Inc.com]

In the article “The 7 Real Reasons Startups Fail (and What to Do Instead),” Inc. identifies 5 of the 7 reasons why startups fail as arrogance, shortsightedness, hubris, egotism, and inflexibility.

Overconfidence can also affect customer acquisition:

“[Entrepreneurs] assume that because they will build an interesting web site, product, or service, that customers will beat a path to their door. That may happen with the first few customers, but after that, it rapidly becomes an expensive task to attract and win customers.” — forEntrepreneurs

2. IGNORING YOUR INVESTORS. Your investor wants their investment — you — to be successful. They are a partner in your business. Investors often put their capital into companies within industries they know so that they can offer the advantage of their experience, perspective, and network.

Communication is critical to a healthy investor-startup relationship. Investors don’t necessary want a call from you every day, but they appreciate when you seek their counsel on major decisions (AND you’ll be glad you asked).

Justin Kan at Startup Grind (via Startup Grind on YouTube)

Take this quote from Justin Kan, co-founder of online calendar Kiko in CB Insight’s “The Twenty Reasons Startups Fail”:

“Your investors are there to help you. Get them involved from the start, and don’t be afraid to ask for help. I think we made the mistake early on of trying to do (and know) everything ourselves, perhaps out of insecurity over being so new to the business world. This is a mistake.”

3. FAILING TO EVOLVE. The path from idea to stable company is never a straight shot, making entrepreneurship a process of constant evaluation and adjustment. Being honest with yourself and your team about what needs to change can be a brutal process. It’s also critical to survival.

“What got you to the last square won’t necessarily get you to the next,” says Cheryl Foil, Principal at Kiddar Capital.

As defined by The Startup Owner’s Manual by Steve Blank and Bob Dorf, a startup is “a temporary organization in search of a scalable, repeatable, profitable business model.” If you’ve stopped evolving, you’d better be a stable company already, because you won’t be a successful startup.

The money’s in the vision, but the devil’s in the details. Vision is useless without a healthy dose of realism. It may seem contrary to the immense levels of confidence it takes to be an entrepreneur in the first place, but if you take responsibility for mistakes and learn from them, you have a much greater chance at being the next success story.


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