We enjoy reading an inspirational entrepreneurial success story, where the entrepreneur as a protagonist overcomes obstacles and builds a thriving, successful company (and become wealthy while doing so). We want to hear about them, learn from and even replicate what they’ve done. However, occasionally this approach is problematic. Jason Cohen, the founder of WP Engine & Smart Bear Software, did a great job explaining this issue stating:
The fact that you are learning only from success is a deeper problem than you imagine… drawing conclusions only from data available or convenient and thus systematically biasing your results.
Startup “success” is a happy coincidence of circumstances — in most cases, it’s a matter of persistence. Companies that fail rarely do so for objective reasons — they become so miserable to keep moving that the founders decide to put it to rest for good. Luckily for newcomers, the startup community often manfully shares their stories — even when things don’t end well.
So why do so many startups flame out? The real reasons can be hard to uncover, but the obituaries written by founders, investors, and journalists offer plenty of clues.
For instance, The CB Insights identified the 20 most cited reasons for failure. They got it by analyzing the compilation of startup post-mortems for some of the most notable fails in their database.
I want to share the list of the 10 startup failures in chronological order. I’ve picked quotes out of each that I thought was insightful, funny, poignant or some combo of the three. They do not summarize the original posts so please do read them too.
…First, you probably want someone who has previously founded and run a company or been CEO at a company founded by others (i.e., not someone who has been an employee his or her whole life). Second, you probably want someone who has previous experience as an executive in the software products business. Third, you probably want someone with domain knowledge. Fourth, you probably want someone with technical knowledge. Whatever strengths Peter, Chip, and Allen may have, all three were 0 for 4 on the qualifications listed above…
Author: Philip Greenspun
Source: ArsDigita — From Start-up to Bust-up
…I believe there are two key lessons to be learned from Cryptine Network’s demise. First, all stock should be on a vesting schedule from day one. Equity is a key resource for startups… The second key lesson is that boards are most effective when they have 3 or 5 voting members and include at least one objective outsider to break any deadlocks…
Company: Cryptine Networks
Author: Andrew Fife
Source: Key Lessons from Cryptine Networks’ Failure
… Control and calculate your user acquisition costs. We initially conceived of marketing as a wildly creative exercise: filming viral videos, launching clever campaigns, pitching media players. That’s partly true, but the best marketing is controlled and calculated…
Author: Mark Goldenso
Source: 10 lessons from a failed startup
…Changing people’s behavior is hard. No one in this market succeeded at doing so — there is no Google nor Amazon of personal finance. Can you succeed where we failed? Please do — the problems are absolutely huge and the help consumers have is absolutely abysmal…
Author: Marc Hedlund
Source: Why Wesabe Lost to Mint
…Unfortunately, we again made the mistake of focusing on engineering first and customer development second. We released our first version to some moderate success and then proceeded to continue to churn out features without understanding customer needs. Only later on after finally engaging potential customers did we realize that market was too small and the price point was too low to have Caliper sustain our company by itself…
Author: Amy Kniss
Source: Lessons Learned
… As the product became more and more complex, the performance degraded. In my mind, speed is a feature for all web apps so this was unacceptable, especially since it was used to run live, public websites. We spent hundreds of hours trying to speed off the app with little success. This taught me that we needed to having benchmarking tools incorporated into the development cycle from the beginning due to the nature of our product…
Author: David Cummings
Source: Post Mortem on a Failed Product
… If there is just one thing you should learn, it is: Just speak to prospects and extract their pain, then sell the painkiller (before building the product). If they are willing to buy, do take their money and invest that money into building the product…
Author: Sérgio Schüler
Source: Startup lessons learned from my failed startup
…In the past year, we have reached a 30% monthly growth, hit over a million delivery, scaled our restaurant partnerships from 450 to 3200 and our customer base from 30,000 to 350,000. And yet today we are filing for juridical restructuring. The reasons are 1) our revenue doesn’t cover our costs yet, and that 2) we haven’t been able to raise a third round of funding…
Company: Take Eat Easy
Author: Chloé Roose
Source: The right words to say goodbye
…So let’s return to this question of mistakes — how can avoid them, and how can you recognize and fix them? You need to learn as much about the art of doing startups as you can. And you need to lose the notion that you learn better in certain ways (“I’d rather read a blog post than talk to people”). Such luxuries are not given to us founders. You need every scrap of insight you can get…
Author: Richard Rodger
Source: Startup Diary: Read, listen and research to avoid fatal mistakes
… We got caught in the trap of thinking that by signing up new users we’d learn more about how they’re using the product, instead of staying focused on delighting our existing customers and turning them into passionate users — focusing on both simultaneously didn’t work…
Company: Rate That Meeting
Author: Danny Roosevelt
Source: Lessons learned from a failed startup
If you have friends or colleagues who are starting their own business, and you found one of these post-mortems useful, please share this with them.
Success stories are inspiring, but there is a lot to be learned from failure. And the startup community, as evidenced from the above, is greatly generous in sharing their knowledge — whether the outcome is good or bad.
Best of luck in your venture!