A few weeks ago, we had an engaging discussion at Startup Leiria during our BYB (Bring Your Business/Beer) session about why startups tend to fail. This conversation was incredibly insightful, and I wanted to distill our key takeaways into a concise summary. The aim here is not to be exhaustive but to share diverse experiences and offer some practical suggestions to enhance your chances of success.

1. Falling in Love with Your Own Idea

After a decade in the startup industry, I’ve seen many founders fall into the trap of becoming overly attached to their own ideas. This often leads to a refusal to adapt to reality. I’ve witnessed founders who keep their ideas secret out of fear they’ll be stolen, or even tattoo their ideas on their arms. The truth is, ideas themselves are usually worth nothing unless they’re backed by validated problems.

Advice: Share your ideas widely to gather as much feedback as possible. This will help you stay grounded in reality. Instead of fixating on your idea, focus on understanding and solving customer problems. Empathy and a deep understanding of pain points and motivations are crucial for any product’s success.

2. Ignoring Co-Founder Compatibility

The famous German writer Herman Hesse coined the words “A magic dwells in each beginning”. And initially, starting a company with co-founders feels magical. Ideas flow freely, and everything seems possible. However, reality soon sets in, and the true strength of a founding team is tested through setbacks and crises.

Advice: When selecting co-founders, ensure they are aligned with your vision and values. Assess their resilience and ability to handle crises by discussing experiences. Strong shared values and a committed vision are essential for navigating tough times.

3. Lack of Focus

Ideas can feel great, like popcorn popping in our heads. This excitement can lead us to drop everything and start on something new. However, if you try to do everything at once, you end up accomplishing nothing. Our brains are like single-core processors, capable of focusing on only one thing at a time.

Advice: When a new idea pops up, write it down and let it rest. Sleep on it and review it the next day with a fresh perspective. Check if it aligns with your vision and OKRs (Objectives and Key Results) to determine if it’s a valuable pursuit or just a distraction.

4. Misjudging Market Timing

Timing is often cited as the number one reason startups fail. Even a great product can flop if introduced to the market too early or too late. For example, there were earlier versions of social networks and streaming services that failed before Facebook and Netflix found success by hitting the market at the right moment. These companies capitalized on improved technology and changing consumer behavior to succeed where others had not.

Advice: Do your homework and research the market thoroughly. Use assumption mapping to evaluate the feasibility, desirability, and viability of your ideas. Understand who has tried similar ideas before and why they failed. Ask yourself, “If this is such a great idea, why hasn’t anyone succeeded with it before?”

5. Solving Non-Existent Problems

This is closely related to the first point. If you keep executing your idea blindly, you risk building something nobody needs. It might be too niche or lack a market. We often build things because we enjoy tinkering with technology, not because there’s a demand. Reality always wins, and if your product doesn’t solve a real problem, nobody will buy it. This failure to address a genuine problem is essentially failing to find product-market fit, which is crucial for startup success.

Advice: Before investing time in an idea, ensure you have a validated problem. Understand your target segments, their pain points, and how they currently solve the problem. Your solution needs to be significantly better for them to consider switching. Conduct customer interviews to develop empathy and competitor analysis to understand the market size. Be cautious if your idea is “unique” with no competitors—it might indicate a non-existent problem.

6. Neglecting the Complexity of Marketing and Sales

Launching an MVP can be a moment of truth with high expectations, but often the world doesn’t care initially. Marketing and sales are tough, and finding your right audience and effectively communicating your value proposition is challenging. Getting the first 100 customers is incredibly difficult and should not be underestimated.

Advice: Experiment early with your value proposition and positioning. Alberto Savoia’s Pretotyping methodology offers a structured approach to test different value propositions via various channels. Product development and marketing/sales should go hand in hand to continuously refine your approach based on feedback and results.

7. Rushing into Development

There are varying opinions on what constitutes an MVP and how much development time is needed. Since the lifeblood of startups is learning and insights, excessive upfront development can lead to financial ruin if you run out of cash. Development can be slow to adapt when new discoveries or pivots are required.

Advice: Adopt a mindset of experimenting and validating assumptions with minimal effort. Often, validation doesn’t even require technical implementation. Pretotyping can help run experiments and gather data quickly and inexpensively. Utilize no-code/low-code platforms to create MVPs faster, allowing you to learn and refine your product based on real customer feedback. Understand what to build first, then scale and perfect it later.

Recommended Reading and Videos

To delve deeper into these topics and gain more insights, here are some book recommendations and links.

Books:

• The Four Steps to the Epiphany by Steve Blank — The first book that discusses how to systematically test product and business plans with fast iterations.
• The Lean Startup by Eric Ries — A classic must-read to develop an experimentation mindset.
• The Right It by Alberto Savoia — Takes Lean Startup principles to the extreme, with methods for running structured experiments to validate business models with minimal effort.

Videos:

• I Messed Up and I’m Sorry | Storytime with Justin Kan — Real-life stories from the co-founder of Twitch.
• Stanford Seminar - Crypto Entrepreneurship 101 — Insights from investor Haseeb Qureshi, particularly useful for understanding co-founder breakups.

Research:

• CB Insights - The Top 12 Reasons Startups Fail (2021)