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Why do SO MANY startups fail?

StompingAcorns

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hi. what did you mean by #4, expensive store front?
Someone who sets up a brick and mortar (B&M) store. They either buy or choose an expensive rental, sometimes in a new area being developed because they think they'll automatically get foot traffic and paying customers from the new development. They pay to have it retrofitted to their store needs; buy fixtures, inventory, signage; and hire employees. They get a loan to do all that, putting up their live savings/retirement as collateral.
 
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Touseyd

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Someone who sets up a brick and mortar (B&M) store. They either buy or choose an expensive rental, sometimes in a new area being developed because they think they'll automatically get foot traffic and paying customers from the new development. They pay to have it retrofitted to their store needs; buy fixtures, inventory, signage; and hire employees. They get a loan to do all that, putting up their live savings/retirement as collateral.

ok & thanks for the quick reply
 

Jeanne Gray

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I was curious to just garner some opinions on this topic. I'm a successful 25 year old business person, I've work in sales and marketing and understand hard work and persistence - branding a product properly and hitting the ground to sell the crap out of it, dealing with rejection. I'm leaving my job at the end of the year to sell my software full time, which I have yet to sell however I know I've been honest in honouring the fastlane commandments that it's a product I've directly seen and heard a large need for, the barriers to entry have been difficult, I control it, it's scalable, and it will be independent of my time. I know I will have to adjust along the way, but to be honest - with hard work I don't see building a business to be that difficult if you work hard and honour the fastlane commandments.

So here's my question - you read stats constantly about how 90% of startups fail and it's the most difficult thing you'll have to deal with. Are these people who just disobey the fastlane commandments? People who don't work hard? Open up needless businesses, chase things they love doing, or franchises? How could 90% of startups fail it seems like so many unless these make up a large chunk of "do what you love" people.

Most of the new business startups fails because of their inability to gain and retain a important number of users.
 

MJ DeMarco

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I mentioned this in another thread the other day.

[Souce: Startups are failing because they make products no one wants]

The top reason? They make products no one wants.

"When the founder of a startup company shuts down her or his business, it’s customary to pen an essay that tells the rest of the community what went wrong. Call it a failure post-mortem. Nine out of 10 startups fail, which is why the failure post-mortem has become so common that it’s practically a Silicon Valley cliché. Some of these essays are honest, enlightening, and brave. Others point fingers or issue backward non-apologies. Medium, the publishing platform, is the preferred medium.

The proliferation of the failure post-mortem has helped create a bizarre cult of failure that seems wrong-headed. Celebrating failure (“Fail fast” goes the mantra) seems to let people off the hook for bad behavior. Upon closer inspection, it seems less misguided than necessary. Starting a high-growth business is a roller coaster. Founder-CEOs feel pressure to keep up the facade of success, even when things are actually falling apart behind the scenes. Only recently, after the tragic suicide of Jody Sherman, CEO of a startup called Ecomom, did the technology community begin to publicly acknowledge the problems with its “entrepreneur as hero” narrative. Publicly admitting to failure, and examining it, can take guts. It also distills the narrative to a case study from which other entrepreneurs can learn."

View attachment 12995

Yup, most of the reasons can sum up to the product.

And yet, very few discussions (at least when I went to school) discuss how to make a product people want. As far as I know, value arrays, value attributes, and value competitions is something I've coined and identified, but I'm sure, will be stolen by a lurking wannabe guru.
 

ZF Lee

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Yup, most of the reasons can sum up to the product.

And yet, very few discussions (at least when I went to school) discuss how to make a product people want. As far as I know, value arrays, value attributes, and value competitions is something I've coined and identified, but I'm sure, will be stolen by a lurking wannabe guru.
...and don't forget the distribution channels.
But it's always the product before the channel. The horse before the cart.

I found some textbooks on entrepreneurship after digging in my college library today..and it was the first time in my life I have found academia material on entrepreneurship. After one glance at some pages, I just put the book back and left the section as quickly as possible before more time was wasted.

Nothing on value development, nothing! And without that, all the financial planning and business structure in the book is useless. And that book was as thick as a block of cheese. I wonder what in the hell business students who take such courses do with such materials?!
I'm glad it ain't my top degree choice, if I were to continue my studies.

The gap in value discussions in college aside, I think you can lay heavy on the thieves with a DMCA or copyright hammer, right?
Or maybe you might not need to worry...the value skew is process-themed, not event-themed, and money chasing followers of wannabe gurus just don't like buying process. Selling events, eh?

I used to be there on the wrong side of the table....I was like everyone else, looking at the salary charts to pick my degree...money chasing even with education, perceiving degrees as events.
 

maverick

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90% of the time consumer Internet companies fail for one reason: Inability to acquire and retain a substantial number of users. In isolation the founders can articulate a reasonable value proposition, but in the real world cutting through the clutter of the 3,000 advertisements per day that the average American is bombarded by is extraordinarily difficult. There are only 24 hours in a day and most are already claimed by family obligations, work, sleep and existing entertainment options; even if you get a user's attention your new product needs to be so compelling that he is willing to forego something else he is already invested in.

To be truly successful on the Internet, you need to build something that becomes one of seven sites that a large swath of users will regularly use. Quite difficult.

Not entirely true. I use Uber whenever I need a cab. Doesn't mean they're on my "seven sites" list. Same goes for spotify, netflix and any other SaaS I use. When I have the need, I use it. Doesn't necessarily mean that I use them frequently.

Like @AllenCrawley, @MJ DeMarco, @Vigilante and other regular contributors have said before:
Businesses/startups fail because they don't have a compelling value proposition.

Building a Compelling Value Proposition | Startup Secrets
 

Joe Cassandra

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Most of the reasons have been hashed over. Here's an example that I was involved in while in college...

I took a job after my freshmen year in college to work at a local Quiznos. The guy, Remy, who started it:

- 40-50
- 3 kids, married
- Worked full-time at Intel (or IBM don't remember). He would sit in the back doing his work for Intel and watch us over the surveillance cameras to make sure we weren't goofing off or eating the food.

-----------
At the time, I knew nothing about business, so I'm drawing lessons from my memory.

By the way he acted towards us and his business...it's obvious he thought this was a ticket to riches.
He'd probably watched some other Quiznos in downtown Atl that bustled from 11am - 3pm, and thought 'Hey, I could get rich from this.'

At a lowly $7/hour, you're obviously not going to attract the best workers. So, you can imagine, I worked with druggies, drug dealers, unreliable teenagers etc. Remy wanted the cheapest labor. He even had his kids volunteer for free (and they didn't want to be there).

Remy picked a tiny back-corner on the corner of building at a busy intersection for his Quiznos. What he probably didn't realize, you couldn't see our little sub shop from the intersection because we were in the flippin' back corner...

Remy's only marketing was having me stand on the corner with a sign saying '$5 lunch combo special!'. Think it got a few people until the cops told me it was illegal to stand there. Remy still sent me out there.

Obviously, as a franchise, there are restrictions on what Remy could do marketing-wise. So, in his case, he needed to do 3 'types' of marketing:

---> Incredible service so people wanted to come back
---> Tasty food made exactly as it should and baked beautifully
---> Incentives for repeat customers...Remy needed to be there at lunch to see the regulars come in.
---> Get involved in the community. With the parks and team to build up the 'Remy' brand. (Chick Fil A's are incredible at this)


[No, he didn't do these.]
-----------------
Remy never thought long-term about the business. He lived day-to-day hoping there was a little more in the cash register when the doors closed at 9pm.

It was a hope-and-pray mission. He'd skimp on soap to clean the dishes, and toilet bowl cleaner...anything to save a penny. He was an employee with pipe dreams of being an entrepreneur. He wasn't ready. You can't go from 0-6mph in 2 seconds and expect not to crash.
With 3 kids, and a wife plus a full-time job, you can see where this is going...

-------
3 years later, the Quiznos closed.
 

AllenCrawley

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To be truly successful on the Internet, you need to build something that becomes one of seven sites that a large swath of users will regularly use. Quite difficult.
Really? What is your definition of "truly successful"?

Now, if you said, "To be truly successful on the Internet you need to leverage a site/platform that is one of seven sites that a large swath of users regularly use", I might have been on board with you.
 
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CareCPA

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MJ DeMarco

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CareCPA

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Great find again! We already banned his other buddy who did the same thing. Now he's banned too.
I come here for original information. If I wanted Quora answers from "experts" I would just go to Quora.
 
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G-Man

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I come here for original information. If I wanted Quora answers from "experts" I would just go to Quora.

Would the answer to what makes people plagiarize random people on the internet give insight into why most startups fail?
 

CareCPA

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Wow, I'm impressed that you thought to check for that. Nice.
Most people, whether they realize it or not, have a "voice" online (you can actually recognize it across forums based on speech patterns, even if they use different screen names). His was all over the place, but always sounded textbook. A quick Google search solves a lot.

Sorry for the complete thread derail OP. Mods, feel free to delete since we're off track.
 
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BeFound Faithful

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E-Myth Revisited keeps coming to mind. May want to read before quitting your job.

For me, the demise of our health drink shop in Beverly Hills was naive optimism (I didn't know what I didn't know), lack of capital, and lack of sales.

Not making sales can be a factor.

Overcoming the fact you "have yet to sell" your software will eliminate that as a cause for you.

That "getting that first customer" (MJ makes a strong point of it in Unscripted ) is a big step in the right direction. Unscripted and Pat Flynn's "Will It Fly?" contain practical steps for test marketing or getting to prove the market ahead of product launch.
 

Tim Allen Jr.

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So for big companies or companies that want to be big (10-100m+ market cap) - not finding a problem that enough people want solved, or a product doesn't solve a 100m+ problem.

Medium sized companies or want to be medium sized (1m-10m)- Not knowing how to leverage money from short term to the long term vision.

Small and medium sized companies - not know how to make money (100k-1M) - not knowing how to make money (a path to money) and sustain growth.

There are plenty of companies/products that do shitty that still make money.
 

Ninjakid

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Because most of them are trash.

I make websites and apps, and some of my clients have been startups.

I remember this one where they wanted to make a poker website, but it was EXACTLY the same thing as a pre-existing one. Nothing new, no ideas about how to provide more value. Just do the same thing and make millions.

Another time a guy contacted me to build the Android version of his startup app. Their VP was a degenerate who tried to sabotage their startup over a disagreement, but apparently was "still considered part of the company." The dude who contacted me was practically begging me to accept shares instead of cash, which I had no interest in, then tried to sell me some cockamamie scheme about how I would get money from this without them paying me. It was seriously pathetic.

Once I was working from my laptop at a coffee shop and overheard these two dudes talking about a kind of app they wanted to make. They came up with nothing and the whole conversation was moaning about how hard it is to come up with ideas. I can't imagine they got anything done.

The last startup I was in the dude who came up with the idea had some new convoluted plan every week, and it was impossible to get anything done and stay on track. That and every idea I had ended up getting shot down because it seemed "too difficult" which is why I left and won't ever have a startup again unless I'm calling the shots.

Just about every startup is worried about getting their idea stolen because they think they're going to be the next facebook.

Sometimes people will have a "business" but it's really an MLM.

So you see, the reason most of them fail is because most are trash.
 
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BrooklynHustle

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I was curious to just garner some opinions on this topic. I'm a successful 25 year old business person, I've work in sales and marketing and understand hard work and persistence - branding a product properly and hitting the ground to sell the crap out of it, dealing with rejection. I'm leaving my job at the end of the year to sell my software full time, which I have yet to sell however I know I've been honest in honouring the fastlane commandments that it's a product I've directly seen and heard a large need for, the barriers to entry have been difficult, I control it, it's scalable, and it will be independent of my time. I know I will have to adjust along the way, but to be honest - with hard work I don't see building a business to be that difficult if you work hard and honour the fastlane commandments.

So here's my question - you read stats constantly about how 90% of startups fail and it's the most difficult thing you'll have to deal with. Are these people who just disobey the fastlane commandments? People who don't work hard? Open up needless businesses, chase things they love doing, or franchises? How could 90% of startups fail it seems like so many unless these make up a large chunk of "do what you love" people.
I think the top reason is building something nobody needs or wants

(no idea how this data was sourced, but #1 sounds right)

startup-mistakes-infographics-blog.gif
 

AFMKelvin

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Why? If you have enough money you can start any business you want. Either from scratch or buy one that's already there.

Only problem is that just because you have the money it doesn't mean you know what you are doing. The people that have the money or the connections to acquired capital do it because that's what "they" want to do. Not because the world needs it.
 

SethTavis

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Someone who sets up a brick and mortar (B&M) store. They either buy or choose an expensive rental, sometimes in a new area being developed because they think they'll automatically get foot traffic and paying customers from the new development. They pay to have it retrofitted to their store needs; buy fixtures, inventory, signage; and hire employees. They get a loan to do all that, putting up their live savings/retirement as collateral.

Ouch!
 
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Tim Allen Jr.

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Because most of them are trash.

I make websites and apps, and some of my clients have been startups.

I remember this one where they wanted to make a poker website, but it was EXACTLY the same thing as a pre-existing one. Nothing new, no ideas about how to provide more value. Just do the same thing and make millions.

Another time a guy contacted me to build the Android version of his startup app. Their VP was a degenerate who tried to sabotage their startup over a disagreement, but apparently was "still considered part of the company." The dude who contacted me was practically begging me to accept shares instead of cash, which I had no interest in, then tried to sell me some cockamamie scheme about how I would get money from this without them paying me. It was seriously pathetic.

Once I was working from my laptop at a coffee shop and overheard these two dudes talking about a kind of app they wanted to make. They came up with nothing and the whole conversation was moaning about how hard it is to come up with ideas. I can't imagine they got anything done.

The last startup I was in the dude who came up with the idea had some new convoluted plan every week, and it was impossible to get anything done and stay on track. That and every idea I had ended up getting shot down because it seemed "too difficult" which is why I left and won't ever have a startup again unless I'm calling the shots.

Just about every startup is worried about getting their idea stolen because they think they're going to be the next facebook.

Sometimes people will have a "business" but it's really an MLM.

So you see, the reason most of them fail is because most are trash.


So looking back at some of the successful 'startups' you've been part of, what made them different?
 

Andy Black

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(Forgive me if I've already mentioned this in this thread... I can't remember.)

I think it was a line from James Altucher that stuck with me:

"You can get money from customers or investors, but not both."

Boom. That explained my experience in a startup.

While the CEO was off courting investors and we were working to create hockey stick growth, no-one was looking at generating revenue from customers.

Our market wasn't the customer, it was investors and businesses who might buy us.

Naturally, we knew more about them than the poor users who signed up to the platform we were building.

Naturally we didn't add much value to those that signed up and they reciprocated by keeping their money firmly in their pocket.

Russell Brunson reasons that startups that take investment are cheating. They're not cheating to win the game. They're cheating by skipping steps in the entrepreneurial process.

Maybe I'm being naive... I don't deal with investors, or businesses that need investment.

James Altucher's line is stuck like a splinter in my mind though.

Last year I wandered into a local enterprise office to find out if there was an incubation centre nearby so I could get a cheap office. The lady there was so excited about what I do that she said I could have a HPSU (High Potential Startup). Off she went to get a rake of forms.

I left the office disappointed and binned the forms.

It would have been a full-time job for me to fill in the forms and learn the dance needed to get the grants and investment on offer.

I'd have gone out of business if I'd neglected my clients like that.

I'd have never learned what the market will pay me to build.

Whenever I hear of businesses trying to get investment I wonder why they can't get the money they want by generating revenue instead...
 
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cutthroughstatic

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GREAT thread. Love all the opinions given here. The general idea from many seems to be that startups fail because they are focused on the founder's needs, rather than the user's potential wants or desires. No value? No business.

A recommended read is Pat Flynn's book "Will it Fly"

I know Pat has a spotty reputation with some because his main income stream is affiliate marketing/telling people how to make money online/bluehost. But the book is actually really good, and outlines some super practical and applicable steps for gauging potential demand and finding wants in the marketplace.

If people put half the time in developing a business plan based around actual wants and desires rather than abstract projections and "potential size of the market", way more businesses would succeed.

Also, most people don't have the balls to do what it takes. Thats a big part of it too.
 

Andy Black

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GREAT thread. Love all the opinions given here. The general idea from many seems to be that startups fail because they are focused on the founder's needs, rather than the user's potential wants or desires. No value? No business.

A recommended read is Pat Flynn's book "Will it Fly"

I know Pat has a spotty reputation with some because his main income stream is affiliate marketing/telling people how to make money online/bluehost. But the book is actually really good, and outlines some super practical and applicable steps for gauging potential demand and finding wants in the marketplace.

If people put half the time in developing a business plan based around actual wants and desires rather than abstract projections and "potential size of the market", way more businesses would succeed.

Also, most people don't have the balls to do what it takes. Thats a big part of it too.
This reminds me...

IMO a business plan should be a spreadsheet of what's already been done, not a pretty presentation of what could be.

I've seen it... achingly beautiful 59 page Powerpoints, a full on cathedral drawn in the clouds and built on thin air.

Excel beats PowerPoint.



"Tell me what you've done and I'll tell you who you are."
 

Andy Black

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Oh, and a big red flag for me from a prospect is:

"I've this idea for an app..."

Nooo... Please make it stop!!!
 
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cutthroughstatic

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Oh, and a big red flag for me from a prospect is:

"I've this idea for an app..."

Nooo... Please make it stop!!!

But, but... it's a gamechanger! Just look at how much revenue farmville generated! I have an idea for the next farmville!!!!!!

HEY CAN SOMEONE DEVELOP THIS APP FOR ME I CANT PAY YOU BUT ITS A GREAT IDEA ILL GIVE YOU EQUITY IN MY COMPANY IT WILL BASICALLY BE LIKE FACEBOOK ONE DAY ANY DEVELOPERS OUT THERE PLZ?
 

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