{"id":36546,"date":"2023-10-20T14:44:44","date_gmt":"2023-10-20T14:44:44","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/fatal-flaws-the-reasons-why-startups-fail-startupsmart\/"},"modified":"2023-10-20T14:44:44","modified_gmt":"2023-10-20T14:44:44","slug":"fatal-flaws-the-reasons-why-startups-fail-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/fatal-flaws-the-reasons-why-startups-fail-startupsmart\/","title":{"rendered":"\u201cFatal flaws\u201d: The reasons why startups fail – StartupSmart"},"content":{"rendered":"
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A key theme of Malcolm Turnbull\u2019s $1.1 billion innovation statement<\/a> is the need to risk failure and learn from it.<\/p>\n

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\u201cSometimes entrepreneurs will fail several times before they succeed and will usually learn more from failure than success,\u201d Turnbull said on Monday.<\/p>\n

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It\u2019s estimated that about 90% of startups will fail, but what are the reasons behind this, and what can founders learn from these mistakes?<\/p>\n

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Although the reasons behind these demises are \u201cvery diverse\u201d there are some regular \u201cfatal flaws\u201d that led to the demise of startups, a new report from CB Insights says.<\/a><\/p>\n

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The figures come from the organisation analysing the \u201cpost mortems\u201d from 101 startup failures. From the list, most of these companies ended 20 months after raising financing, and on average had raised about $US1.3 million.<\/p>\n

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READ MORE: The “classic startup mistake” – What went wrong for Rdio<\/a><\/p>\n

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The problem doesn\u2019t exist<\/b><\/p>\n

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The single largest reason why a startup fails is that there was \u201cno market needed\u201d for what they were offering.<\/p>\n

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These companies were \u201cbuilding a solution then looking for a problem\u201d, and this issue was listed as a main reason for the failure of 42% of startups.<\/p>\n

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One of these companies was Patient Communicator, which was \u201ctackling problems that are interesting to solve rather than those that serve a market need\u201d.<\/p>\n

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\u201cWe had no customers because no one was really interested in the model we were pitching,\u201d the startup says.<\/p>\n

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Treehouse Logic also met the same fate, and says that startups will fail if they are \u201cnot solving a market problem\u201d.<\/p>\n

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\u201cWe were not solving a large enough problem that we could universally serve with a scalable solution,\u201d it says.<\/p>\n

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\u201cWe had great technology, great data on shopping behaviour, great reputation as a thought-leader, great expertise, great advisors, but what we didn\u2019t have was technology or business model that solved a pain point in a scalable way.\u201d<\/p>\n

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No funds<\/b><\/p>\n

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The next biggest reason behind the demise of a startup is a simple one: they ran out of cash.<\/p>\n

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Nearly 30% of startups met this fate, although this reason is usually tied to one of the other factors.<\/p>\n

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\u201cMoney and time are finite and need to be allocated judiciously,\u201d the report says.<\/p>\n

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Building a \u201cdiverse team with different skillsets\u201d is \u201ccritical\u201d to the success of a startup, the report finds.<\/p>\n

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\u201cFailure post-mortems often lamented that \u2018I wish we had a CTO from the start\u2019 or wished that the startup had \u2018a founder that loved the business aspect of things\u2019.\u201d<\/p>\n

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\u201cIf the founding team can\u2019t put out a product on its own they shouldn\u2019t be founding a startup,\u201d failed startup Standout Jobs says in the report.<\/p>\n

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Tracking the competition<\/b><\/p>\n

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Startups also run in trouble when they don\u2019t keep track of their competitors and fall behind without knowing it, the report says.<\/p>\n

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\u201cDespite the platitudes that startups shouldn\u2019t pay attention to the competition, the reality is that once an idea gets hot or gets market validation, there may be many entrants in a space,\u201d it says.<\/p>\n

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\u201cAnd while obsessing over the competition is not healthy, ignoring them was also a recipe for failure in 19% of the startup failures.\u201d<\/p>\n

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Tunnel vision<\/b><\/p>\n

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Another common theme among the defunct startups was \u201ctunnel vision\u201d focused too much on product and not enough on the market.<\/p>\n

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\u201cIgnoring users is a tried and true way to fail,\u201d the report says.<\/p>\n

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\u201cTunnel vision and not gathering user feedback are fatal flaws for most startups.\u201d<\/p>\n

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This is what went wrong for social media monitoring tool VoterTide.<\/p>\n

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\u201cWe didn\u2019t spend enough time talking with customers and were rolling out features that I thought were great but we didn\u2019t gather enough input from clients,\u201d the startup says.<\/p>\n

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\u201cIt\u2019s easy to get tricked into thinking your thing is cool. You have to pay attention to your customers and adapt to their needs.\u201d<\/p>\n

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Other key failings include releasing the product at the wrong time, and the \u201cfatal issue\u201d of disharmony with investors or co-founders.<\/p>\n

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It\u2019s important to recognise what went wrong and learn from these failings, and it takes brave entrepreneurs to share what they did wrong, the report says.<\/p>\n

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\u201cThis type of data-driven analysis would not be possible without a number of founders being courageous enough to share the stories of their startup\u2019s demise with the world,\u201d it says.<\/p>\n

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The full list and report can be found here<\/a>.<\/p>\n

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Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on <\/i>Facebook<\/i><\/a>, <\/i>Twitter<\/i><\/a>, and <\/i>LinkedIn<\/i><\/a>.<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"

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