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Top 10 Reasons Why Startups and Early Stage Ventures Fail

Top 10 Reasons Why Startups and Early Stage Ventures Fail

Quote: “Houston, we have a problem.”  From the movie, Apollo 13


At the risk of sounding like a David Letterman skit, I would like to present my Top 10 List for this category.  By the way, apollo13-box-art-front_GGIDu_28802there is no scientific research to support this and I realize many others have published similar lists.  I just reflected on my 35+ years of experience with startup/early stage entrepreneurs and where I have spent the most time working with them to rectify some significant shortcomings.  So, you might say this is my “if I only knew then what I know now” list.  I hope there is a nugget or two for you to use… so, let’s see what the list brings:

10. Loving the product/service more than the customers.  This is the infamous “build it and they will come” syndrome. These ventures are usually DOA – it’s just that the entrepreneurs do not know it.

9. Unaddressed bad equity splits.  Cutting up the pie is tough enough – giving it to the wrong people for the wrong reasons is often fatal.  It is tough to move forward when you are focused on significant internal matters like equity distributions.

8. Going it alone.  This is the equally infamous “no man is an island” syndrome.

7. Talking more and listening less – to customers, potential financing sources and advisors.  God gave us two ears and one mouth…

6. Ignoring warning signs – there is a reason your body feels pain – it tells you something is wrong.  Problem signs in a business are the same and at times we react the same way we do to that pain in our body – ignore it and it will go away.

5. Bad acquisitions (usually the first one) – either deals for the wrong reasons or good deals with poor execution.

4. Growing too fast – probably saw more ventures go down because of this than those that had a fall off in business. Growth makes you feel good and can hide strains on your venture like not enough people or funds.

3. Not knowing when to get out – never get in without an exit plan

2. Inadequate financing – what was the last thing you did personally or in a business that came in on or under budget?

And the number one reason why startups and early stage ventures fail? – PEOPLE – usually the wrong ones in the wrong roles preventing execution of the vision.  Every financing source I have ever spoken to looks at management over product. When picking your team avoid the “yes man” syndrome.  I had a client who was a real control freak and his favorite saying was “I always admired a subordinate who could stand up and say – you said it chief.”  His venture hit the dirt nap trail pretty quickly.  So, spend sufficient time developing the best team possible.

So there you have it. Good luck and keep on innovating.

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