Omar Mohout - 99 Reasons why Startups fail

LEARN FROM
THE MISTAKES OF
OTHERS. YOU CAN NEVER
LIVE LONG ENOUGH TO MAKE
THEM ALL YOURSEL F.

UNKNOWN

Being your own boss, with no one telling you what to do and when to do it, sounds appealing and exciting, doesnt it? Startup ideas inspire hundreds of thousands of entrepreneurs all over the world. Some of them already are experienced and sometimes even serial entrepreneurs. While others are rookies: theyre just starting their entrepreneurial career. No matter how long they have been in the business, they have passion and motivation in common, and entrepreneurship seems to be encoded in their DNA! But on the flip side, what is also equally true is the fact that the majority of entrepreneurial ventures fail. Have you ever wondered what the catalyst for such failure is?

It takes an extraordinary group of people and the right timing to launch a startup that will not fail. Startup failures are complex. Most of them are not caused by stupid or simple mistakes. So, be careful when you form the following conclusion: Startup X failed because of Y. Therefore I should avoid doing Y in my own startup. It is not that simple. Startups fail because of a combination of factors and causes, some of which are almost impossible to put a finger on. Being too early with an idea is as fatal as being too late. There is nothing more powerful than an idea whose time has come. But be very careful when you read articles about success or failure of other startups. Startups dont grow in a controlled environment but are out in the wild. And in the wild, anything can happen. Every business, small or big, is a complex system with thousands of different activities that constantly interact with each other. Some of these activities are obviously more important than others but you will not find one single activity that is the key to success. Unfortunately, there is no silver bullet. On the contrary, business success emerges from the combination of these activities at the right time and place. As Lazerow stated People who focus exclusively on efforts that matter, succeed. Its that simple. But how do you know what matters? Especially as many of these activities are often new to the entrepreneur. When you have never built a landing page, never cold-called a prospect, never hired someone, never pitched your product or dont know how to make a cash flow forecast; how could you know how to proceed and what should be done first? And it looks like it is all happening at the same time. But here is the good news: all these things have been done before by others whose experience and know-how can provide precious answers. In this book, we build on our own experience as well as the generous advice shared in blogs and interviews by startup experts as Paul Graham, Jessica Livingston, Marc Andreessen and many others.

Based on our work experience with hundreds of startups, we found that most of them are too often focused on the product instead of building the business. Moreover they are too busy with immediate issues and lose sight of the growth path of their business. The majority of resources are typically assigned to the product and not on growing the company.

Launching a startup requires the willingness to fail and learn. Avoiding failure is not a sign that youre smart and being smart is not about knowing all the answers; its about being able to find them. While knowledge is about knowing the right answer, intelligence is about asking the right questions. Even though its common for startups to say that ideas mean nothing and execution is everything, the reality is more nuanced. Even the worlds best entrepreneurs with incredible execution skills will fail if their idea is fundamentally flawed, or if the assumed market is too small.

The step to launch a company should not be taken lightly and might be the most important decision of your life. A startup will take over your life to a degree you cant imagine and for a long time, especially if youre successful. You will be spending sleepless nights worrying or thinking about your business. But by constantly trying new things, you will figure out your true purpose in life. Life is too short to pursue anything other than what you are most passionate about.

Most of the companies fail ultimately because they do one thing really well, but they do not think of the next thing to do, they do not broaden their vision, mission, they continue building on that particular platform in one or another way, they do not challenge themselves, Eric Schmidt, executive chairman of Google.

This book is aimed at identifying reasons that can lead even great ideas to complete failure. It also presents how you can make your way around them, earning everlasting growth and prosperity.

FAILURE IS A
WONDERFUL TEACHER.
BUT THERES NO NEED
TO SEEK OUT FAILURE.
IT WILL FIND YOU.

JEFF ATWOOD

As mentioned in the introduction, business success emerges from the combination of a broad range of activities at the right time and place. Building a sustainable business takes time and you go through a number of different phases in which different opportunities and pitfalls appear. The first stages are all about testing ideas & solutions with users and on the market. It requires a lot of flexibility in adapting your offering. Once you start to scale the focus should be on other aspects like accelerating customer acquisition and building a mature company.

The Startup Genome Report studied data from 3.200+ high-growth technology startups to identify different stages of growth and different types of startups. The report aims to lay the foundation for a new framework for assessing startups more effectively. The data revealed numerous learnings about what makes startups successful, but the number one reason that has shown up again and again is that startups fail because of premature scaling.

It is important to take things step by step. Validate your idea, build a solution for a real problem, find a sustainable business model, then scale.

We have therefore structured this book along the four stages in the startup lifecycle.

By moving from one stage to the other, the risks are reduced because assumptions are validated. The four stages form a value chain:

• No idea creates value until you embody it in a product or service.

• No product or service captures value until you embody it in a business model and pricing strategy.

• No business model becomes sustainable until you figure out distribution.

Getting business ideas is often not the problem, validating (value creation), monetizing (value capture) and scaling (value sustainability) is.

Next to understanding the phase your startup is in at each point in time, the big challenge in any phase is carrying out and keeping track of a whole range of different activities, of which a lot are often new to the founders. You cannot build a product first and think about the business model or pricing and service costs later. You have to talk to customers, look for funding and hire people at the same time. In this book we grouped this array of activities into 5 broad categories: