Revisiting The Only Reason Why Startups Fail

failed startupThis guest column is by James Cummings, CEO, Daily Posts

CB Insight’s “20 Reasons Why Startups Fail” has become a reference point for startup advice. But the statistics from that research and other findings point to one thing: the reason any startup fails is the people.

The wrong people deliver the wrong results

CB Insight’s findings, having the wrong team is the third main reason why startups fail. But a careful look at the other reasons reveal having the wrong team is the only reason. Here are the top 4 reasons given in the research

  1. No Market Need

Different people have different definitions for what a startup is. Whatever definition of a startup you go with, it includes the aim to fill a market need. This is done either by providing a new solution or by improving on an existing solution.

So, how come most startups fail because there is no market need? Many founders start businesses based on a moment’s inspiration. They see a need, genuine as it is and think “that’s a business opportunity”.

Mistake 1 – Sharing your ideas with and taking advice from your mates

If your friends think it’s a great idea, that’s a red flag. Great ideas don’t work in business. You need a practical idea.

Mistake 2 – Consulting no one at all.

Some founders believe in stubbornly “following their dreams”. To them, people will only draw you back. While this is true in many aspects of life, it just doesn’t hold in business.

  1. Run Out of Cash

This happens a lot. You’re either spending too much or you simply didn’t raise enough money in the first place.

Mistake – No financial expert

Many startups are made up of friends from similar backgrounds. But a tech company for example, isn’t just about technology. You’ll need money and an expert to manage the money.

Startups overlook the obvious need for a finance specialist. The specialist will work with you to come up with a realistic figure for your initial and operating capital.

A specialist knows all the areas of expenditure you could never foresee on your own. And they know how to manage your money.

So, instead of just gathering a group of friends or smart colleagues, you should invest in someone with a solid financial management background.

  1. Not the Right Team

It is easy to make mistakes when the right team is not in place to make vital decisions. “Simple decisions such as going with shared hosting when VPS hosting will be right fit for the business online presence could make or mar the business process in the long run” says Brendan Wilde Marketing Manager at Umbrellar Cloud Hosting.

  1. Get Outcompeted

There are many reasons why a startup gets outcompeted: pricing, product quality, bad location, poor marketing, bad customer integration, and so on, which make up the rest of the CB Insights top 20. So let’s focus on getting outcompeted.

Mistake – bad or no advice, and incompetence.

If you have the right people in your team, you will escape most of these pitfalls that kill startups.

What to Do?

You need good and knowledgeable people to help you with decisions. The classic “being too close to see” holds true for startups. Paul Graham had a good grasp of this when he said the main reason why startups fail is having a single founder.

Seek and Heed Advice

Don’t seek validation from friends. Seek advice from experienced and knowledgeable people in various fields relevant to your intended business. A business has many facets and requires expert advice in each.

Hire Experts

Experts will not only do their job properly, they will advise you on what their job should be in the first place.

Search patiently and carefully for experts in the relevant fields in your intended business. This article provides advice on ways to hire on a budget. Look out for people with verifiable expertise and the right attitude.


Check investor business and personal track records, and ensure you are bringing in a partner in growth not a disruptive dictator.

Many startups have actually succeeded. It’s all about having the right team. With the right team, you have the advice and expertise needed to nurture your startup to success.

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