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An interesting idea. The trouble here is that analysis like this tends to document the symptoms of failure as if they were the causes. The actual causes are mor

An interesting idea. The trouble here is that analysis like this tends to document the symptoms of failure as if they were the causes. The actual causes are more likely to be very complex, based on circumstances unique to the startup/people running it, require deep insider knowledge of the company, and in some cases be things people aren't willing to admit or recognize. It's the flipside of a similar problem in analyzing why companies are successful. [1] The little disclaimer at the bottom really says it all. The attempt is a noble one, marred by data and insight quality issues. I think it could be useful if the site can source insightful analysis from founders/insiders and make it easy to search by market/product category. Perhaps even adding a badge to information which came from a founder. [1] http://www.tomorrowtodayglobal.com/2011/12/09/good-to-great-to-gone-2/ http://www.tomorrowtodayglobal.com/2011/12/09/good-to-great-...

ma2rten 9y ago
I feel like former employees sometimes know better why a company failed than founders. If the founder knew exactly what is/was "wrong" they probably had been able to turn it around.
- jstandard 9y ago
  I agree in part. The real trick of it here is that those former employees will also be wearing their own lenses of bias. There's a good chance they don't have full information on the company. Then the challenge becomes a game of synthesizing contradicting perspectives. That's what makes this exercise of distilling causes into "bitesized pieces" so difficult.
  - cookiecaper 9y ago
    There is a lot that goes into running companies that ordinary employees take for granted. I don't think there's any reason the perspective of the average employee will be more accurate than the perspective of the average founder. Both will have strong biases coloring the perception of events in their own favor, and in some cases, problem employees and problem founders may blame each other instead of admitting their own faults. In most cases, there is, of course, no simple way to pinpoint a particular place where everything ran amok. That's to be expected. The analyst needs to listen to everyone with credible knowledge of the company and use their own judgment to come to an opinion on the biggest issue. This is a subjective analysis, and not something that can be authoritatively established.
    - dasil003 9y ago
      This is absolutely true, and I'll take it even a step further: great people can still form dysfunctional teams even if they all do good individual work. Often times in an early stage startup the problem is the team doesn't gel enough to adequately explore the problem space. In those cases, the founder might conclude that the opportunity wasn't there, but maybe it's because people weren't aligned enough to push far enough in the right direction. It's impossible to know whether there was really a viable business there, or whether it was a failure of the team. But subjectively after going through several startups and other early stage projects, I know the feeling of a team that is gelling, and it can make an unquantifiably huge difference to early results.
    - s73ver 9y ago
      That's true, but ordinary employees will have a perspective that founders usually just can't see, usually due to their biases. As such, it'd be better to take in the perspectives of both, to paint a more complete picture.
    - jstandard 9y ago
      > "Both will have strong biases coloring the perception of events in their own favor, and in some cases, problem employees and problem founders may blame each other instead of admitting their own faults." This really resonated with me. It's truly a skill to build the self-awareness to realize when you're the problem. It's much easier to externalize or abstract the problems away, particularly in stressful times where everyone feels overworked. I've caught myself doing this. I have to set aside part of every week to step back, breathe in, and candidly examine how I might be contributing to problems that are happening. Otherwise it's too easy to get wrapped up in the hunt for demons outside the burning house.
- noobiemcfoob 9y ago
  >If the founder knew exactly what is/was "wrong" they probably had been able to turn it around Not always. Changing a single person's bad habits or tendencies is hard enough. 10 people? 100? Culture carries momentum even if the prime mover is found.
  - brianwawok 9y ago
    Sometimes you learn a really good lesson when you have like 30 days runway left. Maybe too late to pivot but still a good lesson.
- nostrademons 9y ago
  Former employees are often biased by their job function. At the first startup I worked at, I had a role that straddled Eng & QA, and the lesson I took away from it was "engineering quality is critically important; we failed because there were too many bugs." In hindsight - having now seen v1 of many other startups - we failed because a lack of nerve, because many other startups charge thousands of dollars a month for product quality significantly worse than what we had. We should've shipped it, had money coming in, used that to negotiate another funding round, and then used the funding to fix the bugs. But without visibility into common sales & fundraising practices of startups, there was no way that 19-year-old-programmer-me could've known that.
  - bluGill 9y ago
    Maybe, maybe not. If you have an all new product you need to get into the market fast. Once you have the basic features working you need to see if customers really exist. Even if it means your customers have to try everything twice because you crash the first time, if they buy your product you fix the bugs they see so that it mostly works and move on. However if you don't have a new product you cannot do that. If you want to release something where the market already exists you can just do one part better you need to be as good in everything else. Tesla didn't release their original roadster without a heater, in the 1950s heaters were optional. You need to figure out which market you are in and release accordingly. Getting this wrong means the death of your company. If you are in the first investors are taking a risk that people will want your product - it would be stupid to invest in perfection when customers might decide your product doesn't fill a need, better to abandon your interesting but useless product early. However when you are in the second you need to meet your user's expectations - thus I don't need to check the feature list to tell you Tesla comes with a working heater standard. Expectations is also why the early reviews of Tesla showed a tow pulling it away with a dead battery - the equivalent stupidity in a gas car would be the tow truck charging $10/gallon for gas and you are on your way in a few minutes. (Tesla has been mostly successful in managing expectations in the years since - now everyone knows it isn't the best car for cross country trips but you can do it once in a while with a little planning - there is a lesson in this too when you are a little different in an existing market make sure the downsides of your different are understood)
- ryandrake 9y ago
  I agree--although they might not have the "full information" as jstandard points out, the employees are in the trenches all day and have to deal with the trouble spots directly. For probably all places I've worked that failed, the employees simultaneously knew the problems (and would gripe about them) but were not empowered to actually fix them. Anyone who's been in this kind of death march situation knows that feeling of helplessness--that the track up ahead is bent and if only we could just run up ahead of the train and fix it...
hashkb 9y ago
At the same time... I see a lot of the same errors at lots of startups. It can be hard to generalize best practices, and harder still to recognize when you are failing to follow them.
aerovistae 9y ago
Sounds like you're suggesting something along the lines of Indie Hackers but for those who were not successful.
nostrademons 9y ago
Something I've noticed with both my own past startup failures and other startups I've known: by far the most common failure reason is "There was no reason for them to be a company in the first place." By that I mean that either there was no customer demand for what they were building, or there were already lots of other companies that solved the problem just as well and they had no unique angle on the problem, or a key technical assumption they were relying on turned out to be false, or the market was better served by lots of little firms rather than one high-growth startup. In other words, they never found product/market fit, because there was either no market for the product or they couldn't build the product to serve the market. The problem is that usually you can only determine this in hindsight. If everybody assumed that the only businesses that can work are those that already have a working product and customers, we'd never get any innovation. I've learned to think of "Finding a reason for the company to exist" as the primary job description for a founder, and failure means that you are doing your job but haven't completed it yet.
- aswanson 9y ago
  Sad fact, but true. Most companies simply have no need to have been started, and the failure stats bear this out. But as you also state, in aggregate, this process is necessary or time stands still.
- wtvanhest 9y ago
  My hunch after starting a few side projects, and taking the leap in to a full on failed company is that while things must be tried, you should secure some level of real customer interest before diving fully in. I'm not sure how much it takes, but there should be real evidence.
- jmspring 9y ago
  What's interesting thinking about history, would Webvan and Pets.com fall under "no demand", "too soon", or just tried to do too much given the timing? Now we have services that are similar, for instance chewy.com is the modern version of of Pets.com.
  - 9y ago
Retric 9y ago
My assumption has long been that ~50% of startups fail because they never actually create a useful product. But, looking at those failures does not tell you much about startups just the basic pitfalls of product development. Similarly, many companies that fail made perfectly rational bets, but things outside their control killed them. Likewise many successful companies may simply have gotten lucky due to things outside their control, even if their initial odds where poor. Which is why I feel like success and failure on their own tell you very little.
mathattack 9y ago
Yes. A big issue is confusing correlation with causality. For instance, "There was no business model, and the founding team was inexperienced and arrogant" applies to Facebook and Google as well as many failures. :-)
craigvn 9y ago
> The trouble here is that analysis like this tends to document the symptoms of failure as if they were the causes. This also holds true for successful businesses! For example, you will forever read books on successful companies and they will say things like "we were successful because we were agile". In reality that is probably not the case, more likely success was because of a million undefinable small things all mashed together.
m0llusk 9y ago
It is interesting that the Homejoy entry is gone. Typical analysis is that they lost business to their own pros and the class action lawsuit regarding the contractors or employees argument. My own experience in the industry suggests that bad treatment and pay for their contractors resulted in ongoing defections and that when a competitor offered just four dollars an hour more all the best cleaners left at once.
- zxcmx 9y ago
  $4 an hour is I guess in the region of a 10% to 20% raise. Not sure about you but I wouldn't turn that down when the difference is working for one faceless online platform versus another. The funny thing about salaries that many companies don't understand is that those extra few dollars can make a huge difference to workers. There's this kind of narrative going around recently that beyond some magic figure (pick a silly number like $70k or whatever) extra money doesn't make you happier etc. What this totally misses out on is that to have a financial future you have to make money over expenses. If it costs you $20/hr to live and you make $24 then $28 actually doubles what you have left at the end of the month. This applies whether you make $15/hour or $150.
  - brianwawok 9y ago
    The flipside is many expenses are discretionary. Your $120 a month iPhone bill? Cable TV? You can choose to say no to either. But consumerism encourages people to max bulls to the ceiling.
    - m0llusk 9y ago
      This is a valid point but it is worth pointing out that in this specific case most Homejoy cleaners were making $11-13/hour working usually 4-6 billable hours a day in big cities and as such could not afford $100+ a month for wireless or cable.
j45 9y ago
In addition to the points above, Timing is an another consideration. What didn't work in 1999 works today because there are users online sophisticated enough to expect a solution. Sometimes solutions have to stick around and survive through a few waves of the solution becoming relevant - either the market catching up to demand the solution, or the solution developing to meet the market. It's a fine reason for building solutions in a lean way that can have a longer runway to let things align
raleighm 9y ago
Exactly. "They were not growing at a rate that returned a decent profit" is true of every defunct business. I do like the idea though - an open commons of "lessons learned" that lets you pass the baton to whomever else wants to tackle the same problem next.

ma2rten 9y ago

I feel like former employees sometimes know better why a company failed than founders. If the founder knew exactly what is/was "wrong" they probably had been able to turn it around.

jstandard 9y ago
I agree in part. The real trick of it here is that those former employees will also be wearing their own lenses of bias. There's a good chance they don't have full information on the company. Then the challenge becomes a game of synthesizing contradicting perspectives. That's what makes this exercise of distilling causes into "bitesized pieces" so difficult.
- cookiecaper 9y ago
  There is a lot that goes into running companies that ordinary employees take for granted. I don't think there's any reason the perspective of the average employee will be more accurate than the perspective of the average founder. Both will have strong biases coloring the perception of events in their own favor, and in some cases, problem employees and problem founders may blame each other instead of admitting their own faults. In most cases, there is, of course, no simple way to pinpoint a particular place where everything ran amok. That's to be expected. The analyst needs to listen to everyone with credible knowledge of the company and use their own judgment to come to an opinion on the biggest issue. This is a subjective analysis, and not something that can be authoritatively established.
  - dasil003 9y ago
    This is absolutely true, and I'll take it even a step further: great people can still form dysfunctional teams even if they all do good individual work. Often times in an early stage startup the problem is the team doesn't gel enough to adequately explore the problem space. In those cases, the founder might conclude that the opportunity wasn't there, but maybe it's because people weren't aligned enough to push far enough in the right direction. It's impossible to know whether there was really a viable business there, or whether it was a failure of the team. But subjectively after going through several startups and other early stage projects, I know the feeling of a team that is gelling, and it can make an unquantifiably huge difference to early results.
  - s73ver 9y ago
    That's true, but ordinary employees will have a perspective that founders usually just can't see, usually due to their biases. As such, it'd be better to take in the perspectives of both, to paint a more complete picture.
  - jstandard 9y ago
    > "Both will have strong biases coloring the perception of events in their own favor, and in some cases, problem employees and problem founders may blame each other instead of admitting their own faults." This really resonated with me. It's truly a skill to build the self-awareness to realize when you're the problem. It's much easier to externalize or abstract the problems away, particularly in stressful times where everyone feels overworked. I've caught myself doing this. I have to set aside part of every week to step back, breathe in, and candidly examine how I might be contributing to problems that are happening. Otherwise it's too easy to get wrapped up in the hunt for demons outside the burning house.
noobiemcfoob 9y ago
>If the founder knew exactly what is/was "wrong" they probably had been able to turn it around Not always. Changing a single person's bad habits or tendencies is hard enough. 10 people? 100? Culture carries momentum even if the prime mover is found.
- brianwawok 9y ago
  Sometimes you learn a really good lesson when you have like 30 days runway left. Maybe too late to pivot but still a good lesson.
nostrademons 9y ago
Former employees are often biased by their job function. At the first startup I worked at, I had a role that straddled Eng & QA, and the lesson I took away from it was "engineering quality is critically important; we failed because there were too many bugs." In hindsight - having now seen v1 of many other startups - we failed because a lack of nerve, because many other startups charge thousands of dollars a month for product quality significantly worse than what we had. We should've shipped it, had money coming in, used that to negotiate another funding round, and then used the funding to fix the bugs. But without visibility into common sales & fundraising practices of startups, there was no way that 19-year-old-programmer-me could've known that.
- bluGill 9y ago
  Maybe, maybe not. If you have an all new product you need to get into the market fast. Once you have the basic features working you need to see if customers really exist. Even if it means your customers have to try everything twice because you crash the first time, if they buy your product you fix the bugs they see so that it mostly works and move on. However if you don't have a new product you cannot do that. If you want to release something where the market already exists you can just do one part better you need to be as good in everything else. Tesla didn't release their original roadster without a heater, in the 1950s heaters were optional. You need to figure out which market you are in and release accordingly. Getting this wrong means the death of your company. If you are in the first investors are taking a risk that people will want your product - it would be stupid to invest in perfection when customers might decide your product doesn't fill a need, better to abandon your interesting but useless product early. However when you are in the second you need to meet your user's expectations - thus I don't need to check the feature list to tell you Tesla comes with a working heater standard. Expectations is also why the early reviews of Tesla showed a tow pulling it away with a dead battery - the equivalent stupidity in a gas car would be the tow truck charging $10/gallon for gas and you are on your way in a few minutes. (Tesla has been mostly successful in managing expectations in the years since - now everyone knows it isn't the best car for cross country trips but you can do it once in a while with a little planning - there is a lesson in this too when you are a little different in an existing market make sure the downsides of your different are understood)
ryandrake 9y ago
I agree--although they might not have the "full information" as jstandard points out, the employees are in the trenches all day and have to deal with the trouble spots directly. For probably all places I've worked that failed, the employees simultaneously knew the problems (and would gripe about them) but were not empowered to actually fix them. Anyone who's been in this kind of death march situation knows that feeling of helplessness--that the track up ahead is bent and if only we could just run up ahead of the train and fix it...

hashkb 9y ago

At the same time... I see a lot of the same errors at lots of startups. It can be hard to generalize best practices, and harder still to recognize when you are failing to follow them.

aerovistae 9y ago

Sounds like you're suggesting something along the lines of Indie Hackers but for those who were not successful.

nostrademons 9y ago

Something I've noticed with both my own past startup failures and other startups I've known: by far the most common failure reason is "There was no reason for them to be a company in the first place." By that I mean that either there was no customer demand for what they were building, or there were already lots of other companies that solved the problem just as well and they had no unique angle on the problem, or a key technical assumption they were relying on turned out to be false, or the market was better served by lots of little firms rather than one high-growth startup. In other words, they never found product/market fit, because there was either no market for the product or they couldn't build the product to serve the market. The problem is that usually you can only determine this in hindsight. If everybody assumed that the only businesses that can work are those that already have a working product and customers, we'd never get any innovation. I've learned to think of "Finding a reason for the company to exist" as the primary job description for a founder, and failure means that you are doing your job but haven't completed it yet.

aswanson 9y ago
Sad fact, but true. Most companies simply have no need to have been started, and the failure stats bear this out. But as you also state, in aggregate, this process is necessary or time stands still.
wtvanhest 9y ago
My hunch after starting a few side projects, and taking the leap in to a full on failed company is that while things must be tried, you should secure some level of real customer interest before diving fully in. I'm not sure how much it takes, but there should be real evidence.
jmspring 9y ago
What's interesting thinking about history, would Webvan and Pets.com fall under "no demand", "too soon", or just tried to do too much given the timing? Now we have services that are similar, for instance chewy.com is the modern version of of Pets.com.
- 9y ago

Retric 9y ago

My assumption has long been that ~50% of startups fail because they never actually create a useful product. But, looking at those failures does not tell you much about startups just the basic pitfalls of product development. Similarly, many companies that fail made perfectly rational bets, but things outside their control killed them. Likewise many successful companies may simply have gotten lucky due to things outside their control, even if their initial odds where poor. Which is why I feel like success and failure on their own tell you very little.

mathattack 9y ago

Yes. A big issue is confusing correlation with causality. For instance, "There was no business model, and the founding team was inexperienced and arrogant" applies to Facebook and Google as well as many failures. :-)

craigvn 9y ago

> The trouble here is that analysis like this tends to document the symptoms of failure as if they were the causes. This also holds true for successful businesses! For example, you will forever read books on successful companies and they will say things like "we were successful because we were agile". In reality that is probably not the case, more likely success was because of a million undefinable small things all mashed together.

m0llusk 9y ago

It is interesting that the Homejoy entry is gone. Typical analysis is that they lost business to their own pros and the class action lawsuit regarding the contractors or employees argument. My own experience in the industry suggests that bad treatment and pay for their contractors resulted in ongoing defections and that when a competitor offered just four dollars an hour more all the best cleaners left at once.

zxcmx 9y ago
$4 an hour is I guess in the region of a 10% to 20% raise. Not sure about you but I wouldn't turn that down when the difference is working for one faceless online platform versus another. The funny thing about salaries that many companies don't understand is that those extra few dollars can make a huge difference to workers. There's this kind of narrative going around recently that beyond some magic figure (pick a silly number like $70k or whatever) extra money doesn't make you happier etc. What this totally misses out on is that to have a financial future you have to make money over expenses. If it costs you $20/hr to live and you make $24 then $28 actually doubles what you have left at the end of the month. This applies whether you make $15/hour or $150.
- brianwawok 9y ago
  The flipside is many expenses are discretionary. Your $120 a month iPhone bill? Cable TV? You can choose to say no to either. But consumerism encourages people to max bulls to the ceiling.
  - m0llusk 9y ago
    This is a valid point but it is worth pointing out that in this specific case most Homejoy cleaners were making $11-13/hour working usually 4-6 billable hours a day in big cities and as such could not afford $100+ a month for wireless or cable.

j45 9y ago

In addition to the points above, Timing is an another consideration. What didn't work in 1999 works today because there are users online sophisticated enough to expect a solution. Sometimes solutions have to stick around and survive through a few waves of the solution becoming relevant - either the market catching up to demand the solution, or the solution developing to meet the market. It's a fine reason for building solutions in a lean way that can have a longer runway to let things align

raleighm 9y ago

Exactly. "They were not growing at a rate that returned a decent profit" is true of every defunct business. I do like the idea though - an open commons of "lessons learned" that lets you pass the baton to whomever else wants to tackle the same problem next.