List of Reasons for Start-up Failures

Start-up Companies
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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

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  Helen Strong
Business Consultant, South Africa

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


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  Helen Strong
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@Anonymous: Your comments open up a whole new debate as to the need for professors to have business experience before be...

  Ramadimetja Eva Ramalepe
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@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

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Please forgive me for my language. If you were teaching entrepreneurship and encouraging startups, knowing the "death-ra...

  Jaap de Jonge
Editor, Netherlands

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@Ramadimetja Eva Ramalepe: I agree there are multiple sources of funding for start-ups. For further reading about finan...

  Maurice Hogarth
Consultant, United Kingdom

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


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