Why startups fail

My friend Michael Trout says:

Fourteen million business plans are submitted each year in the U.S. (according to Google Aardvark) and only 2000-3000 (according to Adeo of TheFunded.com) are deemed successful! So, if you are submitting a business plan then you have a 0.0214% of getting funding each year!

From a systemic perspective, most startups fail due to lack of entrepreneurial education. The founders don’t know how to be entrepreneurs and they don’t understand the basic machinery of running a company. We as a community should be able to fix this.

The endemic problems arise from the assumption that entrepreneurship is easy. It’s not. It’s hard. In my experience, most startups fail for one or more of a small number of basic, core faults:

  1. Lack of commitment. The founders have not obsessively committed the vast majority of their personal available time and energy (and, yes, money) to the success of the company. I mean nights, weekends, sleeping under their desks… at least during the early months.
  2. Lack of market research. The founders have not exhaustively established that their company produces medicine for some kind of pain that is broadly felt by people they can reach and sell to.
  3. Lack of focus on customer satisfaction. The founders have failed to sufficiently deify their customer, and have instead focused inwardly on useless goals.
  4. Lack of ability to inspire confidence. The founders can’t convince an investor that they will be responsible stewards of his or her cash. Right idea + wrong person = epic fail.

So, good luck!

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