Ever wonder why so many companies fail despite having a great idea, supportive market, and a lot of funding? The answer is surprisingly simple and often repeated over and over again. Each entrepreneur operates in a single silo without being able to benefit from others in an efficient way. There are dozens of books, courses, and mentors yet it still happens. Below are the common mistakes I often see.
“Research estimates 30% to 40% of high potential start-ups end up liquidating all assets. But if a start-up failure is defined as not delivering the projected return on investment, then 95% of VC companies are failures”
– Wall Street Journal
5 Reasons Startups Fail:
1. The “If we build it, they will come” Fallacy or “I know what features to build”
The idea may be sexy, but how will people know about it? Why should they really care? Is it sexy enough to pull them away from something else? Do they know they need it?
2. Sales team hired too early and cannot find and exploit a market
Sales teams need more than a pitch and more than a slick. They need to know what the markets are, who the targets are, and why the target should care.
3. Focus on the “launch dates” and executing “the plan”
Locking into “the plan” and focusing on execution to the exclusion of marketplace context and realities risks pulling your team and company out of relevance to your target audience and the conditions necessary for adoption and success.
4. Market validation is ad hoc and not correlated
What is your market validation based on? Is it really representative of a broader market, or was is it vertically cherry picked for success that it doesn’t reflect the reality of your target market a viable market segment/vertical.
5. Premature scaling of business
Startup capital is precious and you cannot always count on getting more when you need it most. Many startups expend that capital too soon, anticipating great success before it happens. They are then left hanging while they wait for that success to materialize all while attempting to pay the bills.
By DEC Mentor, Rick Jackson
About Rick Jackson
Rick is a Dallas based serial entrepreneur that has successfully pioneered and commercialized new, disruptive technology into emerging markets such as distance learning, outsourcing, cyber security, audio/video broadcasting, health care email encryption, and education institutions document management. He has 25+ years in building, leading, and deploying “market maker” sales teams for companies such as EDS, Broadcast.com, Yahoo!, McAfee/Intel, Zix, and Biz Accelerator.
Rick is the founder of BizAccelerator that helps young companies find a market and generate new sales. He serves as a mentor at the Dallas Entrepreneur Center, the United Way Ground Floor incubator, and teaches Entrepreneurial courses for the SMU professional and continuing education school.
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