List of Reasons for Start-up Failures

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List of Reasons for Start-up Failures
🔥 Many entrepreneurial companies end in a disappointing way. For the founders, employees, investors, and even for the community and society as a whole. According to interesting findings of Harvard Prof. Eisenmann, there are 6 main reasons for / patterns behind that:

1. FAILING TO ENGAGE THE RIGHT STAKEHOLDERS. A spectrum of stakeholders, like employees, strategic partners, and investors, all play a role in a venture's downfall.
2. RUSHING INTO AN OPPORTUNITY WITHOUT TESTING THE WATERS FIRST. Entrepreneurs are sometimes too eager to "get an initial product out there" without doing proper, in-depth customer research.
3. FALSE POSITIVES. Inexperienced entrepreneurs regularly misinterpret early signals about market demand, assuming that the main market reacts in the same way as the earliest adopters.
4. SPEED TRAPS. Start ups sometimes invest too heavily upon initial success using major investors funds. But it is very hard to maintain the initial pace of success.
5. HELP WANTED. Problems with hiring the proper executives, recruiting the wrong ones, or needing more financial help of venture capitalists while the market is not good at that moment in time.
6. CASCADING MIRACLES. Some entrepreneurs have an extraordinary ambitious vision. But changing customer behavior + mastering new technologies + closing strategic partnerships with large firms + securing government support + raising huge amounts of capital is very difficult, whilst all five are needed; failing to accomplish just one "miracle" (even when accomplishing all others) is typically a "show stopper".

⇨ Are you aware of an additional reason for startup failure? Not to scare everyone nor be overly pessimistic, but to avoid as many startup failures as possible... Let's try to make the fantastic list of Eisenmann even more complete!
Source: T. Eisenmann, "Why Start-ups Fail", HBR May-June 2021, pp. 77-85.

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		Luckson Mvuu Management Consultant, Zimbabwe
	3 Why Start-ups Fail? Start-ups can also fail because of lack of enough capital needed to finance the initial business activities. This includes the working capital to take care of the day to day business operations. A business is usually expensive to operate during its initial stages as it demands more injections than what it returns.

		Helen Strong Business Consultant, South Africa
	2 Is the Right Training Available? @Anonymous: Your comments open up a whole new debate as to the need for professors to have business experience before being let lose on students. I believe it should be a condition of appointment! I (...)

		Maurice Hogarth Consultant, United Kingdom
	1 The Reasons Why Startups Fail I state the 4 main reasons as: Wishful thinking overriding proper planning. Failing to arrange financing for all costs for 3-5 years (few start-ups are profitable inside 3 yrs) Failing to o (...)

		Ramadimetja Eva Ramalepe Business Consultant, South Africa
	1 Start-ups Failing Due to Lack of Sustainable Financial Backup @Luckson Mvuu: Hi, I agree with you on the point of start up requiring sustainable financial backup at initial stages. However, as the study shows, sometimes, depending on the industry, it is possible (...)

		Helen Strong Business Consultant, South Africa
	1 Marketing Elements Causing Start-up Failure Agree @Luckson Mvuu. Entrepreneurs are underestimating the amount of working and setup capital required. This is compounded via cash-flow problems because of invoicing and debt collection inefficienci (...)

		Jaap de Jonge Editor, Netherlands
	0 Start-up Failure Due to Lack of Financial Capital? @Ramadimetja Eva Ramalepe: I agree there are multiple sources of funding for start-ups. For further reading about financing of start-ups I recommend: "Misconceptions of Entrepreneurs About Venture Ca (...)

		Trilok Sindhwani Consultant, India
	0 Business Schools, Business Start-ups and More than 80% Failures Please forgive me for my language. If you were teaching entrepreneurship and encouraging startups, knowing the "death-rate" of about 80%, not being certain about the "why" of the high death-rate, woul (...)

		Anonymous
	0 Reasons for Business Failures @Helen Strong: With thousands of high-profile business schools around the world and about 80% failures of startups, all we have for reasons are just some very casual guesswork observations - "may-be t (...)