Why Do Most Startups Fail? Because Founders Get Stuck Making This 1 Shameful Mistake
Startups don’t fail because startups are risky. Startups fail because their founders often lack a sense of self awareness.
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Startups are seen as risky.
People that quit their jobs to become founders are called "dreamers"--or uncontrollable creative types. People who choose to work for startups are seen as having a higher threshold for internal chaos. Despite the fact that the dream to build a startup has never been stronger (or more socially acceptable), the truth is, most people still see the whole undertaking as a house of cards.
According to Forbes, 90% of startups fail.
But startups don't fail because they're startups. They fail because of the founders.
We talk about startup issues as if it's the company's problem. Startups themselves are risky.
But a startup is nothing more than a small room full of people, all working on an idea. If something goes wrong, it's not the room's fault. Those four walls didn't make a bad hire, or spend too much money, too quickly. The people inside them did.
Which is why, when we talk about startup failure rates, we should be talking about people more than we talk about the business nature of an idea in the making.
Most startups that fail, fail because the founders lack the self awareness to do the following:
- They want to scale their company horizontally instead of vertically (almost always because horizontal growth is seen as easier than vertical growth)
- They don't run enough hypotheticals that assume the worst.
- They don't know what they don't know--in the sense that they make decisions about things they know nothing about, instead of seeking out a mentor or advisor with that realm of expertise.
- They can't manage their own emotional turmoil (an inevitable part of building a startup) and take their feelings out on people around them (usually team members).
- They see raising money as the solution to their problems.
- They would rather talk and try to prove how much they know, rather than listen and learn.
The worst mistake of all, however, is that most startup founders get stuck on their original idea and refuse to pivot.
I do a fair amount of consulting for entrepreneurs and brands on their messaging.
One thing I run into, over and over again, is that people tend to want me to validate the ideas they already have, rather than me tell them what I genuinely think.
This isn't an isolated problem.
In most cases, startups fail because the founders get so stuck on their original idea, they want to do everything in their power to prove it can work. Even worse, startups that raise money tend to spend a good portion of those funds on marketing and PR--which means spreading the message of something you aren't even sure works yet.
What happens then is the founders feel married to the original idea. If you spend $2M on a marketing campaign, only to realize half-way through your product has some major flaws and you need to pivot, you're going to have to admit (to the world you've just advertised to) that you're changing the direction of the company.
Many founders see this as a blow to their ego--and would rather try to make the original broken idea work, than admit they didn't have it all figured out and keep pivoting in a better direction.
Startups fail because founders get stuck in their egos.
That's the truth.
Founders fail because they want to believe they have it all figured out, even when they don't.
Founders fail because they want to be seen as the smartest person in the room--and not seen as the student.
Founders fail because they can't admit when they're wrong.
Founders fail themselves, long before they fail their startup. And yet, it's "startups" that are seen as risky. It's "startups" that are seen as having low success rates.
What's risky is following a founder that has never led a team before, has no track record for success, and has nothing but a vague idea and a little bit of runway.
And you should be able to spot that from a mile away.