The other day, Rob asked me to email me ten reasons why some of them failed…
1. They ran out of cash.
Why? Flawed business model assumptions, lack of measuring business model hypotheses, overestimating runway by believing that people will pay for what’s being built. Four Steps to the Epiphany
outlines customer development. If you’ve read his bio, you’ll know Steve Jobs’ approach appears
anti-customer-development but I’d say Apple’s turnaround success was largely based on him narrowing down those four key products in that quadrant, even though he was a visionary.
2. No dashboard.
No measurement – everyone’s got their head down in their own tasks/areas, but the team doesn’t know what unites them, how their projects fit into the bigger picture. The strategy’s the map – the map will always change, but the compass has to be clear. Good to Great
talks about how the most successful companies have 20-year purpose as opposed to quarterly goals – the quarterly goals are all tied into the 20-year picture.
4. Lack of founder’s self-awareness.
Founders not being aware of how their personality impacts the business. We all have shortcomings but being aware of them means we can manage them. If the founder doesn’t have the self-awareness or confidence to manage their flaws or take feedback, their shortcomings impact the management style of the business. Even intelligent people fail
5. Lack of market awareness.
6. Lack of data-driven decisions.
Not scaling or pivoting fast enough, not setting processes and automation up quick enough – the goal should always be to be making as much money as possible in the shortest amount of time as possible, with minimal human effort. If this isn’t an equation that’s visible and repeated to the broader team, everyone can start thinking that money grows on trees. Startups have limited runways – by definition – the goal is survival, and regular check-in keeps people aware of that. How much money did we make this week? How much did it cost us to make that?
7. The wrong people on the wrong project areas.
Everyone should be doing what only they do best. The leaders need to lead – communicate – keep the bigger picture / act as CEOs, where tasks are delegated as much as possible to the employees.
8. Lack of honest, transparent, vulnerable communication…
… between the business and the market, between the business and the customers, between the founders. The role of advisors – to help founders have better conversations within themselves.
9. Lack of a visible, realistic, achievable game plan…
… based on misunderstanding the market, customers, the team’s abilities, pricing.
10. Measuring the wrong things.
All that matters is that the business is making as much cash as possible, in the shortest space of time as possible… obviously with integrity, purpose, sustainability – but still, startups die because they run out of cash:
Once you close that round and you get your Techcrunch hit, it’s all now in the past. Having a syndicate of all these famous top-notch investors doesn’t magically create great products. The only metric that matters now has a binary outcome. Have you built something that people want? If yes, prove it. If no, you didn’t make it. The name of your investors on your crunch base page, the number of followers on your Angelist profile, and the cap on your valuation— all will have no relevance if you fail to delight your users. For this one period of time, fundraising is fun. But now more than ever it’s time to prove you’re worth it. Go do something incredible.