1 Reason Startups Fail
Last week at Thrival during a panel on healthcare Sidney Kushner of CC Champions summed up the reason most startups fail. And he did it in under 80 characters (I know because I tweeted it).
He said:
“It’s very easy to identify a problem…it’s infinitely harder to understand it.”
And by extension: you can’t build a good solution until you understand the problem you’re trying to solve.
The tagline for Y-Combinator is “Make something people want” and it’s because according to Eric Reis[1], Paul Graham[2], and a lot of other really smart/experienced people, the reason that 95% of startups fail is because they build something no one wants.
Why does this happen?
In my experience there are 2 main reasons. Either A) entrepreneurs weight their own experience too heavily and build something that solves a problem only they care about or B) they start building solutions before they understand the problem they’re trying to solve.
The skill no one talks about
These both happen because entrepreneurs tend to be pretty bad at one very important skill: Listening.
There are heaps of books, essays, how-to-manuals, TED talks, blog posts, etc that focus on skills of successful entrepreneurs. Plenty talk about “communication” as an important skill, but usually within the context of pitching or sales.
Not unless you dig deep into the interwebs and sift through a dozen “X skills every entrepreneur needs” type blog posts do you actually find any useful content.
Successful entrepreneurs are great listeners
Successful entrepreneurs listen to their customers, they listen to their advisors, they listen to their teammates, they listen to everyone. Then, they take that feedback, decide which data points to weight more heavily than others, and make decisions based off of it.
It’s incredibly hard to be a good listener. Especially in entrepreneurship. You have to be almost blindly optimistic in order to think you will succeed when there’s only a 1–5% success rate. And oftentimes that type of optimism and strong will do not go hand in hand with good listening skills.
How to listen
Good listeners don’t just focus on the words that come out of people’s mouths. They observe body language, they listen to the tone of voice. They take the time to understand a person’s background so they understand that person’s point of view, that person’s motivations, and when that person knows what they’re talking about and when they don’t. They ask why, and force people to explain their thinking.
Essentially, they listen to what people mean not what they say.
This is really important for investors. When an investor talks about an entrepreneur’s “coachability” what she means is: how good is that entrepreneur at understanding the data they receive from listening, and how good are they at transforming that understanding into actions that create beneficial results.
