Tuesday, October 2, 2007

Entrepreneur Issue! - Why do many startups fail?

I got the following question from an entrepreneur and I thought I share it with everyone.

“Why do many startups actually fail? In my observation, i have felt that there are many a startups which have a brilliant idea, a genuine team to execute that and also a good support for the product they intend to build, but still the companies fail to break even. I would love to hear from you your views on why startups fail? cheers, Vaibhav”

There may be a thousand different reasons, but here is an attempt at simplifying a clearly completed question. Here is a stab at a few common reasons:

1- Chemistry: often entrepreneurial teams fail to have the winning chemistry together ; it is a combination of reaching for perfection and greatness and ability to work together to compromise their way to success.

2- Too much Brilliance: a lot of companies fail because the market is not ready for the innovation yet and the entrepreneurs focus on their vision as opposed to what the customer wants or needs – they continue to miss the mark by listening to themselves more than listening to those who pay.

3- Confusing Execution & Effort: a very typical problem in startups is that the team is genuine and genuinely believes that they are executing well, but they are not! Execution is not doing a lot of work. Effective execution is what bridges aspiration and results – simply put, if they were executing well, they would not fail!

4- Not Listening: I have seen this one hundreds of times, Entrepreneurs often think that their situation is different (it is a different market, a unique product, a whatever …) so they fail to listen to their investors or trusted advisors (whom they picked by the way) or listen partially. By the time they begin to listen it is often too late.