The Big 3 — Reasons Why Start-Up’s Fail

I spend a lot of time meeting with company founders and their management teams. By in large, they’re all smart folks – very passionate – charismatic – commited to their business (or business idea) and their teams.

So what makes the difference between the the ones that really rock and those that don’t ? Here’s the Big 3 reasons.

Reason #1 — Iteration Failure

All ideas need building out. Getting goldilocks “right” is an art not a science. Too little iteration and the thing itself just isn’t strong and vibrant enough to achieve success. Too many iterations and what you get is a jumbled mess of features, functions and audiences — and something that took way too much time and $$ to get half done.  Speed doesn’t kill — changing direction constantly though does.

Ask questions like what makes us unique ? What really matters ? What things can we really nail ? How long do we have to get it “right” ? How many times haves we changed our mind (hint: a pivot isn’t a pivot if it looks and feels like a do-over)?

Reason #2 — Money is Time

Successful start-ups decide how much they need to spend and then raise only that amount. And — once they raise those $$ they jealously guard their cash and carefully measure achievements vs. spend rates. Small is beautiful. A start-up with a $20,000/mth burn usually has a lot more flexability and runway than one with a $200,000/mth burn.

I can’t count the number of times I met with a company that was doing just fine — then they raised a considerable slug of $$ — and things began to slowly unravel. They hired folks to “accelerate” before they had the basics nailed, spent $$ on protypes and pilots before they had proved the concept. I could go on and on.

Start small, start slow and spend very, very carefully.

Reason #3 — The Big Ego

I’m fond of saying that founders either want to BE important or want to FEEL important.  Back those, work for those, celebrate those that want to BE important.  Run  from those that want to FEEL important

Look for telltale signs — startup digs vs. big offices, salaries vs stock for executives, bartering for support services vs paying “name” firms, talking to employees vs talking to the media, endless iterations of logo and stationary.  You get the drift.

Sometimes big egos have big ideas and achieve big successes. Often though, their big ideas end up in big disasters because they won’t listen and embrace honest feedback, refuse to recognize things that are not working, and alienate co-workers who don’t feel like the “build effort” is appreciated by the “big idea” founder.

Big egos also exacerbate Reasons #1 and #2 as well.  They see something cool and want to make changes,  they meet someone cool and want to bring them on, they focus on little stuff before the big rocks have been tackled, etc.

America is a great place and there’s a million ways to make a buck.  I see successful businesses every week.  It’s sad when they waste a good opportunity by falling victim to the Big 3.

Cheers.  DC

About dougcurling

a compassionate capitalist
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2 Responses to The Big 3 — Reasons Why Start-Up’s Fail

  1. Steve Scruton says:

    So true-Hope you are well.

    Steve Scruton

  2. Pam Dean says:

    I ran across your blog and stumbled on this one. This is so true and I have seen this happen in a non-profit that has wasted so much $$, implemented changes in leadership and direction nearly every month, and alienates employees when challenged. No doubt an end will come in some form or fashion!

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