Most startups fail because they don't solve a real problem (Juicero, Flud, Karhoo and so on).
When founders speak to potential customers before launching, they ask loaded questions.
"Hey, I quit my job 5 months back and working on this idea on a full-time basis. Do you think it's something that'll solve your problems?"
It's a loaded question because it seeks validation. It doesn't delve into the problem and how painful it is. It assumes the customer values the problem.
That mostly sums up the 'why' behind most failures I've seen.
Given that you understand how important it is for founders to ask the right questions, do you have a set of questions that you would recommend startups to use when engaging with customers
I wish I could say these are the ideal set of questions but it's highly dependent on the context.
First you need to decide who will be the customers/users you want to interview. Are they power users, new users, retained users, churned users, engaged users, paying users, mobile users and so on? You also need to decide what question you want to answer based on their feedback.
I have often seen consulting firms and even internal research teams taking a list of questions to the research. At times 90% of those questions are not relevant to the specific user.
For example, imagine if you are asking a power user what hurdles they face while using the app. Most likely they'll say none or very few. That doesn't represent the view of the majority of your users. But if you ask them why they are using the product their answer will tell you what type of users are deriving maximum value from the product. So it's all very contextual.
First think about the question that you are trying to answer based on this research and frame questions accordingly. Are you trying to improve engagement, get more users on your product, find product's positioning, enter a new segment, add a new feature, get more users on paid version and so on.
Another tip is to ask them for stories- why they use a product, how they purchase it etc.. But be mindful of the fact that users won't tell you the truth always- they'll only tell you their version of the truth. So you need to apply some filters here as well.
Feel free to DM me if you're gathering feedback for something specific and I might be able to help.
Most startups go nowhere. When YC is admitting hundreds of startup into a cohort based on a ten minute interview it's hard for them to beat the odds. But their objective is not to help most startups succeed: it's to add the best in each year to their roster.
Skmurphy - Given your insight about YC, would like to understand what you're involvement is within the startup community. went to your profile but it only mentions early stage startups - perhaps you have a unique perspective with respect to early stage companies & how to grow them to being profitable
I have been an entrepreneur since I could drive, starting a photography business when I was 16. I started a company in college and have worked in large firms and startups in the years since. After two decades working in semiconductors and networking I started SKMurphy in 2003 to help founders generate leads and close deals: early customers and early revenue. I started facilitating Bootstrapper Breakfasts https://bootstrappersbreakfast.com/ in 2006 to give back to the community by cultivating conversations around the practical challenges of organic business growth. I am not affiliated with YC, but over the years have advised several firms that went through the program. My email address is linked in my profile. You are welcome to contact me directly if you have more specific questions.
Most startups fail because, well, it's a zero-sum game out there. Everyone's ultimately competing for the same eyeballs, money, and attention. We may as well ask, "Why don't most kids grow up to be president?"
Creating a successful, sustainable business is a rarity. Creating products that last is a rarity.
I've worked for a couple decades in the software industry and I'm betting that at least 80% of the products I worked on either got cancelled or failed in the market (either quickly or slowly). The only reason those companies were able to bet on those projects at all is they had existing products that did bring in revenue.
The name of the game is diversity. Make lots of small bets and hopefully one of them will be a 1000x idea. Most will fail, though.
I don't think there's really a way to list a "top 10 reasons for failure", at least not from the perspective I had as an individual contributor. However, I would say that from the get-go, most of these projects were doomed to failure because there really wasn't a need in the market for them.
The ones that actually made it to market and eventually died really only lasted in the market because the companies had money to continue betting on them. It wasn't really a matter of "if we just work at this a little harder or pivot it, we'll find a way to make it work." I think in most cases, it was a foregone conclusion that it was going to fail. It was just a matter of leadership needing to ship and see how it would go first.
I'm taking a break from corporate life right now and am just building small apps at the moment, but I can't say I'm good at it from a business perspective, so I'm not making much money from it. I'm more a product development kind of person (engineering it and coming up with a good user design). I think to succeed, you really need to have a good marketing and sales angle.
Edit: I will say that the products I did work on and succeeded in the market were already established in their field, so it was a case of me joining an already good product. I don't think I ever worked on a greenfield project that ended up being big.
Given that you're also taking a sabbatical from the corporate life, shall we discuss building projects in the saas space?
How do i get in touch, would like to get your opinion on a project. It's mainly focused on Fintech
One thing I personally observed is that many angel investors are particularly investing in products that are just cool without the actual problem and I am thinking maybe with the trends of tiktok other tools the market is no longer wanting to invest in the needed product rather one that can capture the youth's attention with virality.
Also another one is many people are discouraged to start something that is maybe similar to what is out there but I was recently looking for a product let's say forms there are so many competitors everyone has their share of bread. No one tells you that . Not all startups have to be unicorn to be successful and be the next IPO. You can still have good revenue, make a good profit, and have an impact.
Have you been actively engaging with angel investors? is that where you get your insight from or is this simply from talking to other startups that have received investment from angels whereby based on your observation, you would say that the tools aren't really necessary.
Has that come from your own personal experience or would you say that's based on your observation of startups that you have come across & engaged with?
Like Gavin Belson in Silicon Valley said: "Failure is a success. The more you fail, the better". But putting all jokes aside, you need to fail first and learn from it in order to succeed. Without feedback, you will steer into an unknown direction and will never see the light of day.
Feedback is good but identifying valuable feedback and noise is the art. If you show the product to someone who does not have a need or problem will give not-so-positive feedback even if you iterate over it the value will not be much.
Luck is occasional but getting prepared for it can be the difference. After that it's as if you're making your own luck by extending your chances of a positive outcome. When you don't work for it, your chances of success decrease.
This I believe. Hard working is about when the opportunity comes, we are more prepared for it.
Luck though, it's way out of our control. I've been blessed and I probably work harder than anyone. The more I work, I can't ignore the fact that the major life events are all out of my control. The things I said " that's never going to happen" kept happening :)
So basically it's probability. by probability i'm referring to the:
The founders are compatible for one another
The market timing for building the tech is 'On the money' based on factors such as ,the technology that enables them to build the startup already exists
The markets are trending towards the products that the founders are building
They meet with the investors who will support them through thick & thin as opposed to 'Sacking' the founders at the first sign of trouble.
I don't remember it in detail, but basically, the research is trying to determine what are the common traits among successful people/businesses/leaders and the conclusion is that luck is the only thing that's common.
On your list, i think there are some truths in your generalization. Meeting the right partner is a luck. market timing is luck. at the early stage, it also depends on luck to get investors.
I think market trending towards something is pretty deterministic. but that's my opinion.
I found the original argument a little weak without citing the actual failure rate among YC backed startups vs startups in general. I'm not surprised that the rate is high nevertheless. Younger, less experienced founders tend to apply to YC for their first startup to learn and be guided. Nothing wrong with that. Once they grow, they could either apply to YC again or do something independent of an accelerator because they are smarter. I still see values from YC even for repeat founders but I'm not going into details as it's off the current topic.
Startups fail because the founders give up. No traction, no money, acrimony among the team are all common but solvable reasons. At the end of the day it's about surviving and you can't do that if no one's driving the bus.
Startups rely on the VC ecosystem to validate and grow, but it comes with its own baggage and it doesn't have to be that way. I think rewarding believers, collaborators, and early adopters with your own coin is something almost no YC companies do but will be more commonplace as time goes on and more founders start companies with Web3 in mind.
I've been a part of startups for most of my life -- in music, banking, fintech, and ecomm.
My best advice is to find mentors.
We've all heard the advice that you should surround yourself with people who are smarter than you, etc. etc. but I think experience is more important than the types of intelligence that people conventionally perceive to be "smart". So finding people who are much more experienced than you and finding ways to work with them is your best chance at success in startups. If your incentives are aligned with your mentors, that is a very powerful force for productivity and high-leverage action.
The number one reason why startups fail is due to misreading market demand — this is found in 42% of cases.
The second largest reason why startups fail (29% of cases) is due to running out of funding and personal money.
Other notable cases of failure are a weak founding team (23%) and being beat by competition (19%).
The 3 main reasons why a startup dies can be controlled to reduce risks.
I understand that there are SOME startups that require investment to grow but I don't believe in permanent unsustainable business models, I believe that market validation is not bolean, it's more complex than that, just because you make money doesn't mean it's scalable and early investment is the root of 30% of failures.
So, what you're saying is there is a lack of founders because they see that startup success rates are low. If startup success rates were higher then in turn there would be more founders wanting to launch startups as they think they have more chance of success based on the current success stories. I don't think this is true. Anyone who thinks they have a good idea will try to make something of it regardless of whether people before them have succeeded, isn't that what entrepreneurship is all about, taking a risk? I do agree with your second point though about support = success, but isn't that obvious already?
Having more outside input/support would definitely help. I'm thinking along the lines of Kickstarter products. When there is already a demand for what you're creating and an invested interest then there is a much higher chance of success.
Unpopular opinion:
Entrepreneurs who "have it" don't even apply to YC.
They just ship, get revenue, grow revenue, grow a team, become unicorn.
So what they're getting are 2nd-tier entrepreneurs who need a guiding hand and/or funding before they can even start getting their first few sales.
I've seen this anecdotally as well. Bluntly put, but well put.
How many unicorns do you know that had 0 investments?
VC vs. seed/pre-seed
Plenty of bootstrapped startups get to $1M ARR on their own.
They then take on VC money to scale.
That's very different from a pre-revenue startup taking pre-seed/seed funding from incubators.
Oh, now I see what you are saying.
Having a product, pmf, and traction before you hit up investors is the smarter thing to do. A much harder thing do to but definitely smarter.
Most startups fail because they don't solve a real problem (Juicero, Flud, Karhoo and so on).
When founders speak to potential customers before launching, they ask loaded questions.
"Hey, I quit my job 5 months back and working on this idea on a full-time basis. Do you think it's something that'll solve your problems?"
It's a loaded question because it seeks validation. It doesn't delve into the problem and how painful it is. It assumes the customer values the problem.
That mostly sums up the 'why' behind most failures I've seen.
Given that you understand how important it is for founders to ask the right questions, do you have a set of questions that you would recommend startups to use when engaging with customers
I wish I could say these are the ideal set of questions but it's highly dependent on the context.
First you need to decide who will be the customers/users you want to interview. Are they power users, new users, retained users, churned users, engaged users, paying users, mobile users and so on? You also need to decide what question you want to answer based on their feedback.
I have often seen consulting firms and even internal research teams taking a list of questions to the research. At times 90% of those questions are not relevant to the specific user.
For example, imagine if you are asking a power user what hurdles they face while using the app. Most likely they'll say none or very few. That doesn't represent the view of the majority of your users. But if you ask them why they are using the product their answer will tell you what type of users are deriving maximum value from the product. So it's all very contextual.
First think about the question that you are trying to answer based on this research and frame questions accordingly. Are you trying to improve engagement, get more users on your product, find product's positioning, enter a new segment, add a new feature, get more users on paid version and so on.
Another tip is to ask them for stories- why they use a product, how they purchase it etc.. But be mindful of the fact that users won't tell you the truth always- they'll only tell you their version of the truth. So you need to apply some filters here as well.
Feel free to DM me if you're gathering feedback for something specific and I might be able to help.
Most startups go nowhere. When YC is admitting hundreds of startup into a cohort based on a ten minute interview it's hard for them to beat the odds. But their objective is not to help most startups succeed: it's to add the best in each year to their roster.
Skmurphy - Given your insight about YC, would like to understand what you're involvement is within the startup community. went to your profile but it only mentions early stage startups - perhaps you have a unique perspective with respect to early stage companies & how to grow them to being profitable
I have been an entrepreneur since I could drive, starting a photography business when I was 16. I started a company in college and have worked in large firms and startups in the years since. After two decades working in semiconductors and networking I started SKMurphy in 2003 to help founders generate leads and close deals: early customers and early revenue. I started facilitating Bootstrapper Breakfasts https://bootstrappersbreakfast.com/ in 2006 to give back to the community by cultivating conversations around the practical challenges of organic business growth. I am not affiliated with YC, but over the years have advised several firms that went through the program. My email address is linked in my profile. You are welcome to contact me directly if you have more specific questions.
Most startups fail because, well, it's a zero-sum game out there. Everyone's ultimately competing for the same eyeballs, money, and attention. We may as well ask, "Why don't most kids grow up to be president?"
Creating a successful, sustainable business is a rarity. Creating products that last is a rarity.
I've worked for a couple decades in the software industry and I'm betting that at least 80% of the products I worked on either got cancelled or failed in the market (either quickly or slowly). The only reason those companies were able to bet on those projects at all is they had existing products that did bring in revenue.
The name of the game is diversity. Make lots of small bets and hopefully one of them will be a 1000x idea. Most will fail, though.
allenu
Given that you've worked on products that had a great run but eventually died out. What would you say were the top 10 reasons for a company's failure?
Are you working on building anything these days or do you take on the role of doing consulting & advising devs on how to build better product ?
I don't think there's really a way to list a "top 10 reasons for failure", at least not from the perspective I had as an individual contributor. However, I would say that from the get-go, most of these projects were doomed to failure because there really wasn't a need in the market for them.
The ones that actually made it to market and eventually died really only lasted in the market because the companies had money to continue betting on them. It wasn't really a matter of "if we just work at this a little harder or pivot it, we'll find a way to make it work." I think in most cases, it was a foregone conclusion that it was going to fail. It was just a matter of leadership needing to ship and see how it would go first.
I'm taking a break from corporate life right now and am just building small apps at the moment, but I can't say I'm good at it from a business perspective, so I'm not making much money from it. I'm more a product development kind of person (engineering it and coming up with a good user design). I think to succeed, you really need to have a good marketing and sales angle.
Edit: I will say that the products I did work on and succeeded in the market were already established in their field, so it was a case of me joining an already good product. I don't think I ever worked on a greenfield project that ended up being big.
Allenu
Given that you're also taking a sabbatical from the corporate life, shall we discuss building projects in the saas space?
How do i get in touch, would like to get your opinion on a project. It's mainly focused on Fintech
One thing I personally observed is that many angel investors are particularly investing in products that are just cool without the actual problem and I am thinking maybe with the trends of tiktok other tools the market is no longer wanting to invest in the needed product rather one that can capture the youth's attention with virality.
Also another one is many people are discouraged to start something that is maybe similar to what is out there but I was recently looking for a product let's say forms there are so many competitors everyone has their share of bread. No one tells you that . Not all startups have to be unicorn to be successful and be the next IPO. You can still have good revenue, make a good profit, and have an impact.
Have you been actively engaging with angel investors? is that where you get your insight from or is this simply from talking to other startups that have received investment from angels whereby based on your observation, you would say that the tools aren't really necessary.
What are you working on currently?
This comment was deleted 8 months ago.
Hi Agota
Has that come from your own personal experience or would you say that's based on your observation of startups that you have come across & engaged with?
How's your startup journey been so far?
Like Gavin Belson in Silicon Valley said: "Failure is a success. The more you fail, the better". But putting all jokes aside, you need to fail first and learn from it in order to succeed. Without feedback, you will steer into an unknown direction and will never see the light of day.
Feedback is good but identifying valuable feedback and noise is the art. If you show the product to someone who does not have a need or problem will give not-so-positive feedback even if you iterate over it the value will not be much.
Would you say you've had some failures & what your most notable lessons ?
Big bets often have higher risks. Also you can't just force idea to be a directive timeline. Most of time, the idea is just too early.
One study by Harvard business school on success, the only thing they have in common is 'luck'
Luck is occasional but getting prepared for it can be the difference. After that it's as if you're making your own luck by extending your chances of a positive outcome. When you don't work for it, your chances of success decrease.
This I believe. Hard working is about when the opportunity comes, we are more prepared for it.
Luck though, it's way out of our control. I've been blessed and I probably work harder than anyone. The more I work, I can't ignore the fact that the major life events are all out of my control. The things I said " that's never going to happen" kept happening :)
So basically it's probability. by probability i'm referring to the:
Would this be a correct observation of : "luck"
I don't remember it in detail, but basically, the research is trying to determine what are the common traits among successful people/businesses/leaders and the conclusion is that luck is the only thing that's common.
On your list, i think there are some truths in your generalization. Meeting the right partner is a luck. market timing is luck. at the early stage, it also depends on luck to get investors.
I think market trending towards something is pretty deterministic. but that's my opinion.
This comment was deleted a year ago.
I found the original argument a little weak without citing the actual failure rate among YC backed startups vs startups in general. I'm not surprised that the rate is high nevertheless. Younger, less experienced founders tend to apply to YC for their first startup to learn and be guided. Nothing wrong with that. Once they grow, they could either apply to YC again or do something independent of an accelerator because they are smarter. I still see values from YC even for repeat founders but I'm not going into details as it's off the current topic.
Startups fail because the founders give up. No traction, no money, acrimony among the team are all common but solvable reasons. At the end of the day it's about surviving and you can't do that if no one's driving the bus.
Startups rely on the VC ecosystem to validate and grow, but it comes with its own baggage and it doesn't have to be that way. I think rewarding believers, collaborators, and early adopters with your own coin is something almost no YC companies do but will be more commonplace as time goes on and more founders start companies with Web3 in mind.
The world needs more startups and more founders!
Have you managed to build a startup?
How was your experience of that & what are the most notable & teaching lessons that you can share with us?
I've been a part of startups for most of my life -- in music, banking, fintech, and ecomm.
My best advice is to find mentors.
We've all heard the advice that you should surround yourself with people who are smarter than you, etc. etc. but I think experience is more important than the types of intelligence that people conventionally perceive to be "smart". So finding people who are much more experienced than you and finding ways to work with them is your best chance at success in startups. If your incentives are aligned with your mentors, that is a very powerful force for productivity and high-leverage action.
About 90% of startups fail.
The number one reason why startups fail is due to misreading market demand — this is found in 42% of cases.
The second largest reason why startups fail (29% of cases) is due to running out of funding and personal money.
Other notable cases of failure are a weak founding team (23%) and being beat by competition (19%).
The 3 main reasons why a startup dies can be controlled to reduce risks.
I understand that there are SOME startups that require investment to grow but I don't believe in permanent unsustainable business models, I believe that market validation is not bolean, it's more complex than that, just because you make money doesn't mean it's scalable and early investment is the root of 30% of failures.
So, what you're saying is there is a lack of founders because they see that startup success rates are low. If startup success rates were higher then in turn there would be more founders wanting to launch startups as they think they have more chance of success based on the current success stories. I don't think this is true. Anyone who thinks they have a good idea will try to make something of it regardless of whether people before them have succeeded, isn't that what entrepreneurship is all about, taking a risk? I do agree with your second point though about support = success, but isn't that obvious already?
This comment was deleted a year ago.
Having more outside input/support would definitely help. I'm thinking along the lines of Kickstarter products. When there is already a demand for what you're creating and an invested interest then there is a much higher chance of success.
This comment was deleted 8 months ago.