Winter 2020 - Inside Outdoor Magazine

Inside Outdoor | WINTER 2020 12 M ake no mistake, ev- ery business journey presents a unique and complex story, with success or failure less the result of one factor or another but rather the culmination of various decisions, indecision, execu- tion, good and bad fortune and mar- ketplace realities. Even so, the folks at CB Insights, a tech and financial markets intelligence platform, com- piled a list of 101 startup failure post- mortems, and while an analysis of the list showed “there is rarely one reason for a single startup’s failure,” said CB Insights, “we did begin to see a pat- tern to these stories.” From those patterns, CB Insights was able to identify “the top 20 reasons startups failed.” Since most startups of- fered multiple reasons for their failures, the chart below highlighting the top 20 reasons for failure far exceeds 100 percent but certainly provides relevant information for anyone in the entre- preneurial ecosystem. Further lessons can be gained from a closer look at the top three reasons as identified by CB Insights and the confessions of some beleaguered founders. Far and away, the top reason why startups crash and burn is that the mar- ket need that may have been perceived simply did not exist – a reason cited in 42 percent of cases. Entrepreneurs, quite simply, too often make the mistake of tackling problems that are interesting to solve rather than those that serve a market need, said CB Insight analysts. “I realized, essentially, that we had no customers because no one was really interested in the model we were pitch- ing,” said the CEO of a failed healthcare technology company. “Doctors want more patients, not an efficient office.” “We had great technology, great data on shopping behavior, great reputation as a thought leader, great expertise, great advisors, etc.,” added the founder of a now-defunct provider of digital shopping applications, “but what we didn’t have was technology or business model that solved a pain point in a scalable way.” Such instances are likely why a month after Paul Graham, Jessica Livingston, Trevor Blackwell and Robert Morris started the Y Combinator seed accelera- tor in 2005, they picked “make something people want” as their motto, said CB In- sight analysts. “Our study shows that fail- ing to do this is one of the easiest ways to guarantee startup failure.” Not surprisingly, the questions of how to spend the finite resources of time and money were also a frequent conun- drum for upstart entrepreneurs and the second-most-popular reason for failure, cited in 29 percent of post-mortems. Running out of cash was often tied to other reasons for startup failure includ- ing failure to find product-market fit and failed pivots, as the team at Flud, a so- cial news app, related to CB Insights. “In fact, what eventually killed Flud was that the company wasn’t able to raise this additional funding,” said one company executive. “Despite multiple approaches and incarnations in pursuit of the ever-elusive product-market fit (and monetization), Flud eventually ran out of money — and a runway.” Directly following issues surround- ing the right product and allocation of resources, the number three reason for start-up failure centered around an in- ability to pull together the proper person- nel. It’s becoming increasingly common knowledge that a diverse team with dif- ferent skill sets is critical to the success of a company, but failure post-mortems also often cited the mistake of waiting too long to pull the trigger on key upper management positions. Executives la- mented that, “I wish we had a CTO from the start,” said CB Insight analysts, or wished that the startup had “a founder that loved the business aspect of things.” In some cases, the founding team wished they had more checks and balances within their employee ranks. As one frustrated founder wrote, “This brings me back to the underly- ing problem: I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.” Call it the all-important ego check. m Start ‘emUp By Martin Vilaboy Why Startups Fail Source: CB Insights