Reason 1: Market Problems-A major reason why companies fail, is that they run into the problem of their being little or no market for the product that they have built.
Reason 2: Business Model Failure- Business Models section, after spending time with hundreds of start ups, one of the most common causes of failure in the start up world is that entrepreneurs are too optimistic about how easy it will be to acquire customers. They assume that because they will build an interesting web site, product, or service, that customers will beat a path to their door. That may happen with the first few customers, but after that, it rapidly becomes an expensive task to attract and win customers, and in many cases the cost of acquiring the customer is actually higher than the lifetime value of that customer.
Reason 3: Poor Management Team- An incredibly common problem that causes startups to fail is a weak management team. Weak management teams make mistakes in multiple areas: weak on strategy, building a product that no-one wants to buy as they failed to do enough work to validate the ideas before and during development, poorly thought through go-to-market strategies.
Reason 4: Running out of Cash- A major reason that startups fail is because they ran out of cash. A key job is to understand how much cash is left and whether that will carry the company to a milestone that can lead to a successful financing, or to cash flow positive.
Reason 5: Product ProblemsMost of the time the first product that a startup brings to market won’t meet the market need. They fail to develop a product that meets the market need. This can either be due to simple execution. Or it can be a far more strategic problem, which is a failure to achieve Product/Market fit.
01, May 2016
The thoughts here are practical and insightful. Great read.