Along the way, I’ve been able to understand some of the lesser-known reasons that some startups fail, and more importantly why a few succeed.
How many startups fail?
Nine out of ten startups will fail. This is a hard and bleak truth, but one that you’d do well to meditate on. Entrepreneurs may even want to write their failure post-mortem before they launch their business.
Why? Because very optimistic entrepreneur needs a dose of reality now and then. Cold statistics like these are not intended to discourage entrepreneurs, but to encourage them to work smarter and harder.
What are the characteristics of startups that succeed?
There are plenty of characteristics of successful startups. My goal isn’t to list them all for you, but rather to point out some of the most significant causes of success.
1. The product is perfect for the market.
Fortune reported the “top reason” that startups fail: “They make products no one wants.” A careful survey of failed startups determined that 42% of them identified the “lack of a market need for their product” as the single biggest reason for their failure.
If you’re going to spend your time making a product, then spend your time making sure it’s the right product for the right market.
2. The entrepreneur does not ignore anything.
After their company folded, Dijiwan’s leaders wrote this:
A good product idea and a strong technical team are not a guarantee of a sustainable business. One should not ignore the business process and issues of a company because it is not their job. It can eventually deprive them from any future in that company.
Ouch. They had a great product. They had a strong team. What did they lack?
An under-the-hood look at Dijiwan makes it clear. They overlooked key aspects of business process and the “boring stuff.” The CEO thinks, “It’s my job to lead.” The CMO thinks, “It’s my job to market.” The lead developer thinks, “It’s my job to code.”
But a startup can’t segment its responsibilities like that. Things are far more organic in a startup, meaning that roles and responsibilities will overlap. Small things can turn into large things. Some of the most important components of a startup are those pesky issues of business process, business model, and scalability.
Successful entrepreneurs understand that they must work on their business, not in their business. Getting caught up in the minutiae of presentations, phone calls, meetings, and emails can distract the entrepreneur from the heart of the business.