Startup Failures: Five Ways To Crash Your Startup, Which Will You Pick?

Written By: Dharmesh Shah November 14, 2006

When talking about startups, it is interesting to talk about market forces, competition, product design and a variety of other things that founders believe they need to really understand and “get right” in order to survive. Though this is true (all of these things are interesting and important), it seems to me that more startups die from preventable causes than from external forces.

Sure, the act of crashing a startup startup is not sudden or immediate, but ultimately, from the company’s perspective, is still just as fatal – it just takes a while.

Here are the top ways that I’ve seen for startups to run a startup into the ground. Some take time, others are pretty quick. If you find yourself falling into any of these camps, I’d suggest reassessing and asking yourself: Why am I doing this? Can I control it? What’s the outcome that I really want?

Five Effective Methods Of Startup Failure:
  1. Death Before Life: I’m going to resist the temptation to dive into the metaphor of pro-life and pro-choice (which is a serious topic and I don’t want to belittle here). But, the concept is that the founder is “ready” to start a business. In essence, the startup is “real” (but it’s just in the founder’s head). At this point, the founder will likely start brainstorming. She will start coming up with ideas, bouncing these ideas off people she trusts and respects (and sometimes even people she doesn’t respect) to get a sense of what might work. The goal is to find The One True Idea that when it arrives in the founder’s brain will become this shining beacon of light that will guide the founder and the future management team through the dark wilderness of startup-land. Lots and lots of would-be startup founders fail with  their startups in the pursuit of The One True Idea. Quick tip: There are very few cases where a founder really comes up with the One True Idea, and even if she did, she’ll likely be talked out of it by friends, family and colleagues anyways.

  1. Failure By Isolation: Let’s assume that the founder does finally settle in on an idea. One of the most reliable ways to fail at a startup (this one takes a bit longer), is to keep the idea to yourself for extended periods of time assuming that you need to stay in “stealth” mode so that someone else won’t steal it. The idea remains in the founder’s head. Little resources can be committed to it, and the idea is never really brought out into the harsh light of reality to see if it can survive even modest scrutiny. Ultimately, when the idea is forced out, it becomes obvious that there is no way this idea will ever really work. Unfortunately, lots of time passes between the original idea and the ultimate realization that it’s not the right one.

  1. Failure By Founder Dissention: If the founder is smart, she will start early in trying to pull together one or more co-founders to help get the business off the ground. Here is where it gets tricky. Founder issues are very challenging. Everything from how do you divide equity, who will do what, who will take on what title needs to be discussed. The only thing worse than disagreeing about some of these things is not disagreeing about these things because you haven’t even talked about them. I wrote about this in “Important Questions Startup Co-Founders Should Ask Each Other”.

  1. Failure From Doing Nothing: When I say “doing nothing”, what I really mean is “doing nothing that is creating value for customers”. I am constantly amazed by how many creative ways founders can find to do things that have the illusion of moving their startup forward, but that has almost nothing to do with creating value for customers. Let’s design this fancy website. What about our business cards! What about this 120 page business plan? Surely we have to think through competitive analysis to make sure we build the right product. Don’t get me wrong, all of these things are important – but they are all trumped by the single act of creating customer value. If you don’t know how to create value: ask the customer! So many startups delude themselves into believing that all the activity around strategy and planning and marketing and “launch preparation” (yep, I’ve heard that one too, before the product development was even started) is what will determine their success when they “finally get out there”. I get really worked up about this one. I’m going to go get a cup of coffee and stare out my window so I can cool down.
    …Ok, I’m back.

  1. Failure From Determination: To clarify, what I mean here is when you are determined to make your original idea a success. You read somewhere that lots of startups die because they give up on their idea too soon and you’re not going to have that happen to you. Come hell or high water you will see this idea through! Here’s an insider tip: Most successful startups end up doing something that is different from their original idea. Dogged determinedness will likely keep you from building the business that you could have built. Yes, you can’t just drop every idea that comes along at the first sign of conflict or controversy. It’s a very thin line (nobody said startups were easy).

There are of course lots of other reasons could fail, but the reason the reason I selected the above ones are because they are all under the founder’s direct control. We have not talked about industry selection, competition or anything else. I don’t know about you, but I’d argue that a higher percentage of startups fail for one of the above reasons than the “we got our pricing all wrong and so couldn’t really get market traction” kinds of issues. What do you think? What are other methods of startup suicide are out there? Perhaps there are a few that I missed that are even more effective.

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