David Feinleib at Mohr Davidow Ventures pens a piece called, “Why Startups Fail.” Here are his four reasons with my thoughts below.
1. Spending too much on sales & marketing before they’re ready
This is exactly why we encourage new companies to stay as far away from venture funding as they can. VC’s encourage you to spend! And since software is virtually free, and hardware is dirt cheap these days, and you only need a couple people to get your company and product going, the only place to spend your money is on sales and marketing. And spend you do, cause there’s nothing easier in this world than spending other people’s money.
2. The market outpaces the startup’s ability to execute
I hear this one discussed a lot, but I rarely see evidence of its impact. The market doesn’t really move that fast. Things generally move pretty slowly. Consumers move even slower, and consumer loyalty is built through great experiences over time not through early availability. First mover or early advantage is overrated. Google was late to search, Flickr was late to photosharing, Facebook was late to social software. Being late gives you a chance to watch the market develop and spot what’s actually working and what isn’t. Take your time, build something valuable, and then go to market. No, you can’t wait 36 months to release something that’s 3 years behind, but if you’re a few months “late” (whatever that means), and you’re great, you’ll do just fine.
3. There is no Entrepreneur
This one I do agree with. Every great company has a great leader who is willing to make decisions, say “no” more often than “yes,” and see a clear vision through to fruition.
4. The market takes too long to develop
If the market takes too long to develop, there is no market… it doesn’t exist. Unless you have one of those rare products that can create a market, you’re dropping a product into a void. So don’t blame the market, blame the entrepreneur’s judgement.
(One other thing)
One more thing I want to comment on. At the end of the article there’s this sentence: “A startup that struggles for reasons beyond the entrepreneur’s control.” This deflects blame in the wrong direction. If the entrepreneur finds themselves in a situation they can’t control it’s almost certainly because they put themselves in that position — either by borrowing too much, spending too much, rushing too fast, creating a false sense of urgency, hiring the wrong people, attacking a market that doesn’t exist, or not focusing on generating revenue early enough. Natural disasters are out of our control, bad business decisions are in your control.
(And another thing)
“It’s not just how fast you run the race that matters. It’s how fast the race is run. When it comes to startups, speed wins.” That’s just ridiculous.