Do You Know Why Startups Really Fail?

Like love, a great idea isn’t enough.

This is written for your good, not to pull you down. Yes, you, for who isn’t a dreamer of the dream of wild success and immense wealth from a killer idea, whether in papads or neural networks?

I know much expert analysis and scholarly research exists on this topic, but that sort of thing has never stopped me from giving you my viewpoint. I am not starting now! And if you believe it, I expect a few people to read this and learn something so we get fewer sob stories and better things in life. Plus, it’s easier (and better, as you’ll see) to pontificate than start a startup.

(This is not about small and micro businesses that extend existing industries. We are taking startups as new businesses based on supposedly unique value propositions.)

I readily and thankfully admit I haven’t jumped into the startup fire. Still, from close observation, here are the five top reasons startups fail.

1. There’s a limit to the number of new things we need or want.

Sheer saturation kills 999 out of 1000 ideas. In products and services, humanity now has the problem of plenty, not scarcity. Not everyone can afford a Gucci bag, but everyone can have a bag. Not everyone can buy high-end Nike Air, but everyone can have sneakers. It’s so for phones, games, cosmetics, and millions of other things.

The situation is similar in what companies use. Systems for HR, finance, sales, automation, data, etc., are so plentiful even successful companies eventually close down. Every company’s mantra is growth, growth, growth, for not only is it almost impossible to penetrate the giant steel ball of existing things, but just staying in it is tough as hell.

Every year new opportunities seem to open up. For example, right now, it’s all about AI. But usually, it’s just old wine, and new bottles quickly become shattered dreams.

2. You can’t be both a product and a business guru.

A good idea and a good business have no direct relationship. A potentially attractive product does not jump-start a successful company, even for Coca-Cola, Barbie, or the iPhone. Those who single-handedly try to shape the development and run the business fail. So do most who get a partner or professional for the business, for the two heads have to be conjoined or one schizophrenic entity, which is as rare as the proverbial. Hydra-headed startups soon pass into myth.

3. The investment seems enough, but it’s not.

So you work out a business plan and get an angel investor or seed money, Series A, B funding, etc. You think you’ve gone through the shark tank (on TV or in conference rooms), so you must be safe. And those wise heads who grilled you seemed so intelligent and tough. But tell you what, they are usually the latter because they aren’t the former. Otherwise, I wouldn’t be writing this, nor you reading it.

Money makes money when it has critical mass. Whatever you think you need, you need three to ten times as much to get over the hill. Whatever you think. Development, testing, marketing, selling, management, hiring, and outfitting suck money rapidly and relentlessly.

4. Working desperately is unhealthy and unproductive.

No gain without pain is as mistaken in work as in exercise. Working from dawn past midnight day after day gives a mixture of sensations — short-term achievement, adrenaline rush, pride, bravado, team bonding, sense of worth, etc. But the brain and body are so full the mind misses the wood for the trees. You can’t step back, draw a breath, get off the treadmill, and think of better ways to do things. Does this sound like a recipe for health? Or the best use of your potential? Personal and business repercussions are inevitable, which certainly don’t guarantee success. Rather the opposite.

5. The market does not attend magic shows.

Capitalism has won. You can’t sell without a brand, and you can’t be a brand without sales. You can cry yourself hoarse that you are the new Uber, Twitter, or Google Search, but why should anyone believe you?

Half the good ideas are bad ideas powered by human hubris.

The other half suffer from problems 2, 3 and 4. The slow or negligible market traction fuels reason #3 (financial trouble), creates much of reason #2 (fraternal dissonance), and inevitably leads to reason #4 (stressed burnout).

Then what?

Good ideas are gold. Humans have become so numerous and powerful on Earth from invention and innovation. But a terrific concept needs a proper vehicle and a proven driver to take it places.

Here are some ideas that provide an alternative to certain-to-fail startups. It’s from an armchair detective, so go ahead and criticise them. Just don’t say determination pays or something sappy like that. You’re better than that.

I am only trying to save you from yourself. If my experience and thoughts make sense, then hear the messenger.

1. Prove beyond doubt your idea baby is Jesus or Krishna (or Isaac or Albert, for atheists) — It isn’t. Trust me. It’s just another baby in a million born today. Wishing, hoping, and forcing won’t make it a messiah or genius. But hey, it’s possible, and I’m listening. So convince me. If you did, read on.
2. Incubate your idea in a large company — How a company got large is no concern of yours. Just use it. A more significant number of great ideas will benefit the world when they’re nurtured inside a larger engine. For example, develop quantum computing inside IBM or a new headset inside Sony. (I have nothing to do with them. They’re just examples.)
3. Jump off a known brand — A variation on a popular and familiar theme is comforting for humans. They relate to it and are receptive to it. Use this reality by finding a successful product or service line and enhancing it. For example, add a new image manipulation tool to Adobe Photoshop.
4. Overload the funding — To penetrate the steel sphere of the market, you need a Titanium Nitride tip, and it’s expensive. If there is objective evidence your concept will be a valuable new thing for humanity, make sure that a financial shortage will not cause its premature demise. If you expect a ton of success, get a ton of money.
5. Make sure it’s a partnership made in heaven — Only those as complementary as Bill and Paul (Microsoft), Steve and Steve (Apple), Larry and Sergey (Google), and Bill and Dave (HP) can create product+business magic. Don’t be sentimental about your partners in a company’s innovation division or a startup. You’ll do each other a favour if you stop when you see anything less than yin and yang.

End note

Some of the greatest successes were startups. But like one murder doesn’t make a flock of crows, we can’t be blind to what’s happening with so many unfit ‘hopefuls with ideas’ trying to climb Mt. Startup Everest and falling, freezing, or wheezing to death.

Are we the most intelligent species on Earth (clearly, we’re not the nicest) if we can’t recognise the madness that is startups?

Just get what I’m saying and get with it. Or get out. Or don’t get in. Please. We can’t waste your idea in a startup. Nor waste you.

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