While failure is not fatal, there’s definitely no harm in stacking the odds in your favor in the first place. With some proper insight and critical thinking, the chance of a venture’s success can be increased by mitigating some of the most common startup risks.
That’s why it is not enough to know how many startups fail – we must know why startups fail.
CB Insights, a venture capital database, did their homework based on 101 startup post-mortems to pin down causes on why startups failed. Here’s the results in infographic form:
WHY STARTUPS FAIL
The most common reason for startups to meet the grim reaper was a dreaded lack of “product/market fit”.
In other words, a startup was unable to satisfy a real market need with its product. Famed investor Marc Andreessen says that product/market fit is so important, that the lifespan of a startup can be broken up into two parts: before product/market fit, and after the fit is achieved. Once it is obtained, it’s a game-changer that increases the chance of success tremendously.
Presumably, the startups that never achieve such a fit end up in the graveyard. The analysis from CB Insights above agrees, showing 42% of startups fail because they do not solve a real market need.
The two other major reasons why startups fail include running out of cash (29%) as well as not having the right team (23%).
Inevitably, there’s no changing the fact that the vast majority of startups will meet their bitter end. That said, a better understanding of the above causes of failure may help to mitigate the risks of any new venture. And even if a startup does meet its maker, the founder may still have another shot: failed entrepreneurs often find more success the second time around.
As Winston Churchill says: “Success is not final, failure is not fatal: it is the courage to continue that counts.”
Original graphic by: Lance Surety Bond Associates