Why do start-ups fail? The top 20 reasons?
A really insightful report was recently published by CB Insights on the main reasons why start-ups fail. From lack of product-market fit to the wrong team, the report breaks down the top 20 reasons for startup failure by analyzing 101 startup failure post-mortems.
Note: Since many startups offered multiple reasons for their failure, you’ll see the chart highlighting the top 20 reasons doesn’t add up to 100% (it far exceeds it).
Very interesting to see that some of the top reasons relate to a lack of understanding of the customer need with no market need, user-unfriendly product, ignore customers and poor marketing all ranking high in the list. I believe these can easily be applied to any new product or service launch, not just a business start-up. It is commonplace that large well-established brands, such as an MNO, will invest significantly on a new product launch only to see it flop through poor user take-up.
What is becoming more and more important is a focus on good user experience design, we talk a little bit about that in our post regarding the importance of good user experience design here. Inherent in the process of developing good user-experience is continually seeking customer feedback throughout. Not just on aesthetic aspects but extending that to overall product usefulness and product to target market fit. Something that is all too often overlooked but is increasingly important in the app led digital-first world we are fast moving towards.
In the spirit of failure, CB Insights also dug into the data on startup death and found that 70% of upstart tech companies fail — usually around 20 months after first raising financing (with around $1.3M in total funding closed). However, let us not despair, as Tomas Eddison once said:
“I have learned fifty thousand ways it cannot be done and therefore I am fifty thousand times nearer the final successful experiment.”
You can read the full report here The-20-Reasons-Startups-Fail.
By Hamish White
Hamish White is the Founder and CEO of Mobilise and is an international Mobile telecommunications expert with 20 years’ experience covering 4 continents, with a speciality in managing greenfield or transformation projects.