Four reasons why startups fail

We see a lot of startups that fail, it’s the nature of the beast in an environment that is so incredibly fast moving and competitive. These are some of the more common and avoidable mistakes that we work hard alongside our partner companies to help them avoid.

This post was inspired by John Zeratsky’s post Eight common dysfunctions of design teams. Design is at the heart of a lot of the early important work at a startup, hence the overlap.

  1. Starting with solutions – founders start by having an idea and then most check it’s feasibility by visualising a solution. That’s the right thing to do. However, having established that there’s one potential good solution the best next step is to go back to building a deeper understanding of the problem space and customer to check if there’s a better solution. This applies to everything – product features, visual identity, copy, UX, tech stack and go to market strategy. To avoid this mistake spend time with customers and establish goals and metrics before creating solutions.
  2. Groupthink – these days companies and their products and brands need to be remarkable to win. In Zeratsky’s words: “Groups are no good at making decisions—at least not the way we normally do it. We want everyone to be happy, so we talk and talk until we’ve reached consensus on a decision. And we let social dynamics get in the way: power relationships, seniority, loud mouths, etc. This all leads to decisions that nobody is excited about—decisions that don’t reflect a unique, opinionated perspective.Solution: Use voting to capture everyone’s opinions, then lean on the decider to make the call.”
  3. Polishing a brick – as Zeratsky says, we spend far to long polishing and perfecting unproven solutions. These days a minimum level of quality and design is required before people will take notice of a new solution, but understand what that is and ship as soon as you’ve reached it. If you find yourself believing that your product will only work if it’s fully featured and highly polished you should go back and double check whether your core proposition is strong enough. To avoid this mistake give yourself deadlines that you can’t get out of. Being clear on what you have to achieve by when to get your next round of funding and breaking that down into monthly targets is a great discipline.
  4.  Shaky foundation – every startup is built on a foundation of assumptions about the customer, the product, and the world. Too often founders let those assumptions go untested, even unstated. In The Path Forward we advocate first making sure that the company’s idea is valid – and that requires listing out the assumptions and testing them to know that the fundamentals of the business are strong, that there is a need for the product and that the company has the right skills to prosecute the opportunity. Many companies move too quickly to focus on the product or even on scaling the business, but if the foundations aren’t strong growth will always be more challenging and will eventually falter. Solution: Follow The Path Forward to validate your idea and lay strong foundations that will allow you to build a valuable business.