Why Startups Fail

All of us have read the statistics about the percentage of startups that fail (and the even smaller percentage that receive venture financing).  But why is that?  Well, there are two reasons IMHO:  Lack of focus and bad decisions.

1. Lack of Focus. How many times have you sat through a discussion with a friend or colleague who walks you through their grand idea for a new product or service and the story keeps going on and on and on?  The ideas flow like water off Niagara Falls.  Well, maybe not Niagara Falls but you get the point – one idea leads to another, then another, then another.  Entrepreneurs are excellent idea people but very frequently fail to focus on that one revolutionary idea to get a product or service launched.  So, if you want to avoid being a statistic, do yourself and your customers a favor and focus.  Select the one idea, one feature, or one product that will put your business on the map and that will get you customers and press.  Then you can focus on being able to describe that one thing that you do better than anyone else in one sentence.

2. Bad Decisions. New businesses are unpredictable.  There are many moving parts and many decisions to make simultaneously, not to mention the constant proliferation of new technologies that may make any business obsolete over night. Founders get paid the “big bucks” to make difficult decisions, the decisions that will define the product strategy, marketing strategy, and culture of their business.  Making one bad decision may not mean the end of the company but doing so repeatedly can.  Implementing reasonable decision-making methodologies based on data, such as net present value (NPV) or internal rate of return (IRR) calculations for new projects, can result in fewer bad decisions and, perhaps, some really, really good ones that can differentiate your business from the competition. Oh, and while you’re at it, only hire employees and vendors that get this and can contribute to your culture of excellent decision-making.

Being mindful of these two reasons for startup failure can mean the difference between failing to launch and coming up with the next big thing.  It doesn’t hurt either that both financial and corporate investors like to see founders that have laser like focus and a record of stellar decisions.  So, if you are going to create a personal mantra to repeat to yourself every day when you walk into the office, remember “focus and good decisions, focus and good decisions, focus and good decisions.”