Why Do Startups Fail? Two Main Reasons: Product-Market Fit and Team

We all know that the majority of startups fail. Most of you probably saw the infographics of CBI Insights with the Top 12 Reasons Startups Fail.

When you dig into the details and group the reasons, you would probably see the two main patterns emerge:

1. Inability to Achieve Product-Market Fit
2. Not the Right Team

1. Lack of Product-Market Fit

Here are the top reasons related to PMF:
- Ran out of cash (38%)
- No market need (35%)
- Got outcompeted (20%)
- Flawed business model (19%)
- Regulatory/legal challenges (18%)
- Pricing/cost issues (15%)
- Product mistimed (10%)
- Poor product (8%)
- Pivot gone bad (6%)

Taken together, 9 out of the 12 reasons for failure can be traced back to an inability to achieve PMF.

2. Not the Right Team
Interestingly, while most of the reasons for failure relate to PMF, investors still say the No. 1 reason they invest in a startup is the team.

- Not the right team (14%)
- Disharmony among team/investors (7%)
- Burned out/lacked passion (5%)

Takeaways for Startup Founders

- Focus on market validation: Before you build, ensure you have a deep understanding of your target market’s pain points.

- Relations management: Your No 1 task as founders is relationship management. Constantly build your relations with your team and investors to make sure your team morale is high, and manage relations with the supporters, customers and general public to know the market as now one knows.

- Be ready to pivot: If the market or product isn’t working, adapt. Remember, your mission is to build what customers want, not what you think they need.

—————————————————

🔥 Join 3N to stay on top of startup news!