31Aug

Top 20 reasons why 95% of startups fail?

We all know the success stories of Facebook, Airbnb, Twitter and Uber. 

But only 5% of startups are successful. 

In a detailed review of over 2000 startups financed with venture capital reveals that more than 95% of the startups fail to see return on investment. And 40% of US startups liquidate all assets, with investors losing all their money. 
Startups fail according to the study because the old management methods of a good plan, a solid strategy and thorough market research don’t work for startups, as they operate with too much uncertainty. An analysis shows us the top 20 reasons why startups fail.

  • Insufficient market need . . . 42%
  • Ran out of cash . . . . . . . . .    29%
  • Poor management team . . . .23%
  • Beaten by competitors . . . . . 19%
  • Price/cost issues . . . . . . . . . .18%
  • Poor product . . . . . . . . . . . . . 17%
  • Poor/no Business model . . . .17%
  • Poor marketing . . . . . . . . . . . 14%
  • Ignore customers . . . .. . . . . .14%
  • Product mistimed .  . . . . . . . .13%
  • Lose focus . . . . .. . . . . . . . . . .13%
  • Disharmony with investors . 13%
  • Bad pivot . . . . . . . .. . . . . . . .10%
  • Passion fades . . . . . . .  .. . . . .9%
  • Poor location . . . . . . .  . . . . . .9%
  • No investor interest . . . . . . .  8%
  • Legal issues . . . . . . . . . . . . . . 8%
  • Did not  use advisors . . . . . . .8%
  • Burn out . . . . . . . . . . . . . . . . .8%
  • Failure to pivot . . . . . . . . . . . .7%

There is seldom only one reason why start-ups fail, this is why the list exceeds 100% The main reason though why startups fail, is that the founders have a ‘big idea’ and come up with a so-called solution for something there is no market need.

A successful start-up needs three ingredients: 

  • a relevant market need (ideally a painkiller and not merely a vitamin – thanks Jerry Engel) 
  • a feasible simple solution and 
  • a viable business model. 
The way to get things done is not to mind who gets the credit for doing them. 
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