startup companies

Why Startup companies fail ?

You’ve got dollar signs in your eyes and you’re hustling around the clock to turn your startup into the next billion dollar unicorn. Maybe you’ve raised some seed money, hired a small team of rockstars, and are envisioning your name on the cover of Forbes.

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Why Startup companies fail ?

But a harsh reality check is incoming. According to groundbreaking new research from the Startup Genome project, a mind-blowing 92% of startups fail. And you’re likely among the ill-fated majority – unless you avoid the 5 deadly startup mistakes uncovered in their analysis.

After digging through data from over 3,200 companies, the Startup Genome researchers found there are just two core requirements for startup success: 1) a kick-ass product that people love, and 2) a massively huge market opportunity for that product. In other words, you need the potential to scale big.

 

startup companies

 

The problem? Most startups prematurely pull the trigger on scaling their business before they’ve nailed those two essentials. They misfire on “premature scaling” of various critical dimensions before the fundamentals are locked in. It’s likened to putting a cracked engine in a Formula 1 racecar and flooring it – an epic blowup is inevitable.

The Startup Genome identifies 5 specific dimensions that startups must carefully and systematically balance while gradually scaling:

  1. Customers: Are you taking the right approach to acquire customers in a sustainable, cost-effective way? Or just spraying them with a silly-string marketing budget?
  2. Product: Does your product seamlessly solve a painful problem that customers can’t live without? Or are you getting distracted building loopy features for a handful of loud users?
  3. Team: Have you carefully assembled a lean, All-Star team with the right balance of skill sets and experience? Or carelessly bringing on warm bodies and diva personalities that will tank your culture?
  4. Business Model: Are your revenue model, pricing, sales strategy, and operational processes built for massive scalability? Or did you hack together a setup that worked for your first few customers but will break down at higher volume?
  5. Funding: Have you raised just enough capital at each stage from the right investors to hit your next reasonable milestone? Or did you get drunk on VC money before having a sustainable business?

The startups that flop focus too much on hyper-growth ahead of mastering the right scalable versions of all 5 dimensions. They go “chest first” on one or two dimensions while neglecting the others. And the results are as ugly as taking a belly flop off the highest dive platform.

 

Why Startup companies fail ?

 

On the other hand, the startups that get it right meticulously prioritize progress across all 5 dimensions at each phase ahead of aggressive scaling. It’s like methodically passing a series of training levels in a video game before leveling up to a higher difficulty setting.

They start by first nailing a brilliant product that efficiently solves a widespread, high-value problem. Then they invest to validate a massively scalable business model with a dependable architecture for acquiring and supporting customers. Only once those two foundations are solid do they then start leveling up their team, fundraising, and go-to-market efforts in sync with scaling the business.

Yes, it requires more patience and discipline than the dysfunctional visionary types founding most startups are capable of. But the few that can pull it off without falling victim to premature scaling? They’re the 8% that turn into phoenix-like success stories we all dream of.

So keep your dreams of startup glory alive. But be self-aware if you’ve fallen into any of the 5 premature scaling traps. Course correct by re-focusing on proving product-market fit and a massively scalable business model first. Vault each of those crucial hurdles before clearing your mind of any unicorn visions. Otherwise, you’ll be among the 92% whose startup aspirations burn up like a meteor