This Is The Reason Thousands Of Startups Die Every Year

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Staff Writer

Staff Writer

Article writen by one or more writers at Inversk Magazine
Staff Writer

Failure sucks. Startups are dying in numbers every year. Greater percentage of them shutdown and the founders move on to something else. The good thing is that most entrepreneurs don’t give up that easily. You can easily start a new business but maintaining it is where the real deal is.

These reasons are common with failed startups or those that are about to die: we need more money, we need more traction, we need growth, we need to start making money or else…, we don’t have enough buzz, we have management issues and founders have lost interest in the idea. Startups need to have the same kind of urgency to get things off and working as soon as possible, otherwise doomsday will be closer than they think.

The money of your customers is the life-blood of your business. Not the money of investors. Not the money of your family or friends. Without paying customers, your startup starves, suffocates and eventually dies by suicide.

Justin Kan, the founder of Justin.tv and Socialcam, wrote an enlightening essay a few years ago about how startups don’t die, they commit suicide.

In this essay, Justin gave an example of AirBnB founders Brian Chesky and Joe Gebbia, who tried to make AirBnB work for years. They racked up thousands of dollars of personal credit card debt. It wasn’t until they got into YCombinator and really focused on generating revenue and hitting profitability that they really started seeing product traction. Here is why greater percentage of startups are more likely to commit suicide.

1. They lack product traction. Justin writes, “When startups commit suicide, often the root problem can be traced back to a lack of product traction — it’s rare to find people willingly quitting companies with exploding metrics.

One thing that many entrepreneurs don’t realize is that patience and iteration are critical in achieving product market fit. Overnight successes might happen fast, but they never actually happen overnight.”

2. Many have plans with no visions. Many products have plans but few have visions. They have endless lists of features and capabilities but no unifying vision that everyone is working toward.

A product vision is a high-level view of the value you want to provide and an understanding of who you want to provide it to. It’s really that simple — in fact, the simpler the better.

3. No Revenue Model, Ever. OK, I understand many startups may not have a revenue model from day one but will try to quickly build up a large audience and monetize it later.

There better be a clearly communicated revenue plan for when that day happens down the road.. and that day will definitely come. And, that revenue plan needs to be material enough, based on credible assumptions, to make it enticing for an investors to get excited and to justify your current valuation.

For some products, consumers will never pay for them based on free alternatives available online. So, if you are hoping for advertising to make up the shortfall, you better have a clear and affordable roadmap to millions of users to get the attention of advertisers.

4. They get in the ring but can’t stay in it. “Persistence isn’t just key — it is everything. Getting in the ring is hard, but staying in the ring is even harder, especially when you feel beaten down, tired and alone.

Successful entrepreneurs will readily tell you about the good times, their secrets to success, and even their mistakes (with a ready helping of how they overcame them), but they will rarely mention the times they were ready to throw in the towel and do something else.

The truth is that everyone has those moments, and the guys you read about on the cover of Fortune were the ones that didn’t quit at them”, says Justin.

Nobody can promise you will succeed if you stick with your startup. What I do know is that if you give up, you won’t possibly succeed.

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