Why Start-Ups Fail

by Lauren Schneidewind on April 15, 2016

The Start-Up world is in right now and everyone has a great idea they want to bring to life. This world is new and exciting, and everyone seems to want to jump on this roller coaster of a ride. Unfortunately the success odds aren’t great. We have all heard that 90% of start-ups fail. Did you also know that of that only 10% of the successful businesses make it past $250k? It gets even slimmer with only 4% of successful businesses making it past the one million dollar mark. There are a couple of reasons why start-ups fail and they have nothing to do with your awesome idea. I am here to tell you that your idea, as cool as it might be, isn’t that important in the big picture.

Is your mind blown or did you stop reading because you have the best idea ever and I am way off base? ☺

The most important key to success has nothing to do with your idea. There are millions and millions of people out there with great ideas, but great ideas don’t get you anywhere. The key to creating a successful start-up is understanding the market and learning about what the market needs and wants. There are several character traits that make for a great Entrepreneur such as being stubborn, having tenacity, drive, a willingness to listen, and embracing change. However, these traits will only come into play if you have an idea/product that the market is willing to pay for. Steve Blank’s, The Four Steps To The Epiphany, Successful Strategies For Products That Win, is a great resource for laying the groundwork for launching your amazing idea.

Some products are built for a specific market, but the technology could be applied to all sorts of different industries. The crucial step that start-ups have a tendency to by-pass is searching for the market fit stage.The Georgia Tech incubator, ATDC defines a start-up as:

A temporary organization designed to search for a scalable and repeatable business model. Startups are NOT smaller versions of large companies. Startups SEARCH for unknown business models. Startups fail because they confuse SEARCH with EXECUTE.

This key initial step can save start-ups hundreds of thousands of dollars and countless hour by spending more time at the beginning truly searching for who and what the ideal market is AND understanding what the market is willing to pay for. As a rule of thumb it is easier to launch a product that fulfills a need rather than a want. Then again, outliers do exist. Did we need to have information at our fingertips like Steve Jobs envisioned 20 years ago? Apple accomplished changing a want-to-have into a must-have, and the market has never been the same.

What Apple, Google, Facebook, etc… have accomplished is nothing short of spectacular, but I am not trying to create the next Megatrend, it would be awesome don’t get me wrong, but I am going to take the path with the greatest chance of success. The best way to achieve that success is by clearly defining and knowing what the market is willing to pay for it. Following closely behind searching for a market is the ability to pivot, but that is for our next conversation.

What do you think the number one reason start-ups fail? Or better yet, let’s keep this positive and discuss why your start-up was a success?

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