Analytic firm CB Insights just published its study of 101 failed startups to uncover why they didn’t make it. It’s a revealing list. Here’s a summary of their Top Twenty Reason:
|
Reason |
Percent |
Reason |
Percent |
|
1. No Market Need |
42% |
11. Lost Focus |
13% |
|
2. Ran Out of Cash |
29% |
12. Disharmony Among Team/Investors |
13% |
|
3. Not the Right Team |
23% |
13. Pivot Went Poorly |
10% |
|
4. Got Outcompeted |
19% |
14. Lacked Passion |
9% |
|
5. Pricing/Cost Issues |
18% |
15. Failed Geographic Expansion |
9% |
|
6. User Un-friendly Product |
17% |
16. No Investor/Financing Interest |
8% |
|
7. Product Without a Business Model |
17% |
17. Legal Challenges |
8% |
|
8. Poor Marketing |
14% |
18. Didn’t Use network |
8% |
|
9. Ignored Customers |
14% |
19. Burn Out |
8% |
|
10. Product Mistimed |
13% |
20. Failure to Pivot |
7% |
This is like a checklist of issues you should be sure to avoid. It seems surprising that the top reason for failure was that there was no market need. This really reinforces the need for startups to go out and interview customers to validate interest in their proposed product. Apparently, doing so is not so common.
Inability to raise money is not the problem (#16), but pricing the product unprofitably (#5) and running out of cash (#2) are bigger ones.
There are a lot more details in the full 25-page report you can download here.
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ABOUT THE AUTHOR
Gary Simon is the Chair of CleanStarts Board. A seasoned energy executive and entrepreneur with 45 years of experience in business, government, and non-profits.