Tom Eisenmann - Why Startups Fail: A New Roadmap for Entrepreneurial Success

Why do the vast majority of startups fail? That question hit me with full force several years agowhen I realized that I couldnt answer it. In quick succession, I had witnessed the demise of two startups that I knew well, both founded by former students of mine. Youll meet these entrepreneurs and learn about their experiences later in the book. The first, Triangulate, had assembled a talented team to create and operate online dating sites. The second, Quincy, had come up with a terrific idea: to sell stylish, affordable, better-fitting work apparel for young professional women. Id encouraged my students to launch both of these ventures, and I was also an investor in Quincy. Yet, despite their strong promise, both of these startups failed. Why? In each instance, I could list many possible reasons, but I couldnt pinpoint the root cause.

This was unnerving: Here I was, an academic expert teaching some of the countrys brightest business minds how to give their future companies the best shot at success, yet I was a failure at explaining how they could avoid failure. And, since more than two-thirds of new ventures fail, that left a lot of explaining to do!

For the past twenty-four years, Ive been a professor at Harvard Business School, where Ive led The Entrepreneurial Manager, a required course for all of our MBAs. At HBS, Ive also drawn on my research, my experiences as an angel investor, and my work for startups as a board director to create fourteen electives on every aspect of launching new ventures. HBS is a startup factory: Our alumni have founded more than thirteen hundred venture capitalbacked startups since 2006. Weve seen our fair share of successes. Over the past ten years, nineteen HBS startups have achieved unicorn statusa valuation in excess of $1 billionincluding Stitch Fix, Cloudflare, Oscar Health, and Zynga. Many of the unicorns founders were my students; I provided guidance and feedback on their venture plansas Ive done with at least two thousand other HBS students and alumni.

At the same time, weve had plenty of failures. Most were promising ventures founded by bright, committed entrepreneurs. Many of these founders followed our playbook for startup success diligently and executed it flawlessly. They identified a gap in the market, devised a differentiated product to meet that need, and validated market demand using the best Lean Startup techniques. They chose a proven business model, sought out advisers, and hired employees with the experience their startup needed. By all accounts, these ventures should have succeeded. And yet

My inability to explain why these high-potential companies failed to live up to their promise cast doubt on whether the playbook I was teaching at HBS was as bulletproof as I thought. Was the advice Id given to countless founders unsound? And if I couldnt sufficiently explain the causes of startup failure, how could I be confident that I was teaching my students to achieve startup success?

Thats when I became determined to do everything in my power to really get to the bottom of this question of why startups fail. By isolating the behaviors and patterns that often lead to failure, I hope to help entrepreneurs avoid fatal missteps, and thus spare them, and their teams, a great deal of pain. Failure hurts! And if its due to avoidable errors, it doesnt just hurt, it also wastes time and capital that could be better spent elsewhereto the benefit of not only entrepreneurs, employees, and investors but also society at large. Society needs entrepreneurs to solve a spate of problems and cant afford to have talent and resources tied up in ill-considered, ill-fated ventures. But, at the end of the day, if an entrepreneurs startup does fail, despite her best efforts, I want to equip her with tools to learn more from the experience and bounce back stronger. With those goals in mind, I launched the multiyear research project that culminated in this book.