Why Most Startups Fail



Nearly 90% of startups fail after one year. It’s a lot. There are many reasons for this.
Five of the reasons in the top 10 are related to customers, among them the fact of not meeting their needs or having a bad customer design which means not listening enough to their feedback. Or even worse, ignoring them. Other reasons are not having the right team or being unable to create an MVP and, therefore, not mastering the product.

And while we’re about reasons why startups fail, let’s also mention the lack of alignment between the founders and investors or the lack of focus or passion. What about money in all of this, you may ask? But, according to a study, money-related reasons are only two of the top 20 reasons why startups fail. This is not surprising because a startup is, first and foremost, a human enterprise whose success depends on how the people inside the organization (the employees) and outside (the customers) are managed.

So, what can you do so that your startup does not join the cohort of those who crash after a year? Two things are essential. And they are inextricably linked.

The first is a truism. It is to have a business model that meets a need and generates revenues. No revenue, no business. I won’t go into detail about designing a business model that sticks. There is no lack of literature on the subject — (those who want to know more can contact me).

Still, having a good model is not enough. For a business to be sustainable, it must meet a need and have meaning. This is the second element. It is inextricably linked to the first. Meaning is the reason why you do what you do. One does not go without the other to the point that generating revenue, or pursuing a just cause, is not enough on its own. The two are linked because money will not be enough to motivate those who work for you and will fail to encourage them even more if you run out of cash during hard times. You, too, will not be motivated anymore. You will throw in the towel and move on. In other words, website money doesn’t bring people together. Meaning, on the other hand, does.
Money is the fuel that gets you from point A to point B. Meaning is what will keep you and your team going to get there.

So if you’re a VC and faced with an entrepreneur driven by a just cause, then you’re more likely to bet on the right one because the probability they’ll have the guts to keep going and work hard to get there is higher. Not to mention that they are more likely to surround themselves with the right people than someone whose only goal is to make as much profit as possible. Because the team of the first one will be inspired and motivated by the purpose they have set, it brings people together, not money. Or if it does, not for long. Cultivating a sense of purpose will make a startupper and their team do everything to succeed.

Closing thoughts:
Some will say that the above is reductive. There are certainly businesses that can function without having a meaning that transcends them. However, I don’t see many that last. So, I’ll stick to what I said.

A co-work means bringing together entrepreneurs and allowing them to exchange. So does a bar that has the effect of facilitating social interactions.
A bakery too. To give quality bread to people who need it or to continue an artisanal tradition.
A bookstore, too… well…

I don’t know of any businesses that do not serve a purpose. It’s a question of where you place the cursor. As much as a social enterprise will be more concerned with generating impact than profits, a technology startup will aim for the opposite. But both will have the ambition to serve a purpose and make profits. In both cases, this is what will make them last longer.

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