List of Reasons for Start-up Failures

Start-up Companies
Knowledge Center

Forum
Jaap de Jonge
Editor, Netherlands

List of Reasons for Start-up Failures

🔥NEW 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.

  Luckson Mvuu
Management Consultant, Zimbabwe
 

Why Start-ups Fail?

Start-ups can also fail because of lack of enough capital needed to finance the initial business activities. This includ...

  Helen Strong
Business Consultant, South Africa
 

Marketing Elements Causing Start-up Failure

Agree @Luckson Mvuu. Entrepreneurs are underestimating the amount of working and setup capital required. This is compoun...

  Anonymous
 

Reasons for Business Failures

@Helen Strong: With thousands of high-profile business schools around the world and about 80% failures of startups, all ...

  Helen Strong
Business Consultant, South Africa
 

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 be...

  Ramadimetja Eva Ramalepe
Business Consultant, South Africa
 

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. H...

  Trilok Sindhwani
Consultant, India
 

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-ra...

  Jaap de Jonge
Editor, Netherlands
 

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 finan...

  Maurice Hogarth
Consultant, United Kingdom
 

The Reasons Why Startups Fail

I state the 4 main reasons as: Wishful thinking overriding proper planning. Failing to arrange financing for all...

 

More on Start-up Companies:
Summary
Forum
Genchi Gembatsu - Go Out and Talk to Customers
Validated Learning of Lean Startups: The 3 A's
👀List of Reasons for Start-up Failures
Creating the Company Culture of Start-ups
Start-Ups Should be Socially Beneficial
4 Sources of Sustainable Growth and 3 Engines of Growth for Startups
Best Practices
Strategy for Start-ups: The Entrepreneurial Strategy Compass
Development Stages of Small Businesses and Start-ups
Pitfalls in Financial Planning of Start-ups
The Main Tensions in High-tech Start-ups
Why Start-ups Prefer Short-term, Non-External Financing
Special Interest Group

Do you have a keen interest in Start-up Companies? Become our SIG Leader

Start-up Companies
Knowledge Center



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2022 12manage - The Executive Fast Track. V15.8 - Last updated: 18-8-2022. All names of their owners.