Why Startups Fail


Mark Wieczorak has a fantastic post about why startups often fail, which includes the graphic at the left. He makes a great case for starting your business without leaving your day job, which is one way to lower your expenses and thus help you reach profitability faster. If you plan to start something in the near future, consider how you can do it with minimal disruption to your day job, and how you might ramp up slowly.

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  • You’re right. This is a fantastic post… well worth reading the whole thing.

    But when he writes that there’s “mounting evidence that there’s tremendous advantage to being first. Copycats will make money, but on an order of magnitude less than the original. Don’t be a copycat” I have to say I’d like to see his mounting evidence (that link doesn’t do it).

    There’s plenty of disconfirming evidence that shows being first is not the big advantage people say if it’s any advantage at all.

    Don’t be a copycat means “differentiate.” That’s sound advice. But while this is a really great post I can’t buy that one bit about first-mover advantage.

  • That’s a wonderful blog post – I can vouch for the fact that keeping expenses to a minimum is definitely the way to go. It takes a long time and a lot of work to make a startup business profitable. Like it was stated in the article, never stop trying new things and always look for new revenue streams.

  • Curt Doolittle

    I can see why you think the article is beneficial, but honestly, actually, as a whole, it emphasizes a defensive position, on cash when that is not why startups fail. As someone who has purchased many, many companies, most of whom were in trouble, the primary reason for their failure was their inability to identify and exploit customers, and instead, thinking that “if we build it they will come”. Cash managment is not a problem for startups. It’s a problem in expansion of a successful business. Most entrepreneurs fail to identify a sufficent market, a means of reaching it, the way to build an organization to take it to market, and the credit necessary to do all of the above. Being cheap with your pocketbook is at best a help that shows that you have good judgement, but focusing on it can also be a lethal and convenient distraction – but it is not an end. And if an end, it is a destructive one.

  • As someone who has consulted with many, many, many entrepreneurs and has interviewed thousands of others over two decades for books and articles I say, “nonsense.” Startups need room to make mistakes and financial resources give you the room to learn from failure.

    Startups also need to “do much with small means.” If you think that is a lethal focus tell it to IKEA among many others.

    While I agree that thinking “if we build it they will come” leads to failure, so does thinking that cash management is not a problem.

    As for the idea that “failed” entrepreneurs have failed to identfy a sufficient market, the means for reaching it, the way to build etc etc… well duh. But if they have the resources this failure won’t turn into a business ending disaster.

  • A lot of these posts are like greek to me. You’re starting out with the assumption that *every* new business has huge reserves of cash and “exploitable customers.” Most people I know… most people that most people know, simply don’t live in that world.

    I think everyone who wants to start a business should watch that show American Inventor and see just how passionately these people believe in their crap. These people are us! Without concrete external proof that our business ideas are valid, there is absolutely no reason to believe there is any market for it whatsoever.