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Startup mistakes: Lessons from failed startups

230 points by mitchbob 6y ago

capnorange 6y ago
weird usage of the term "Marketing" to mean business related(product market fit, competition etc).
- disease 6y ago
  Event "product market fit" feels like a sugar-coated way to say that no one is interested in purchasing your product. I don't have a startup, but if I did I would view every single step in the process of creating one, both technical and non-technical, as an opportunity to test the market viability of your product. I'm honestly surprised at the abundance of non-product-viability issues that were cited as determining factors. Maybe this reality is hard to face?
  - ska 6y ago
    but if I did I would view every single step... To a first approximation, everyone knows this and at least tells themselves it is what they are doing. The real problem is that is hard. In the vast majority of cases, much harder than the tech & engineering you are doing.
  - jandrese 6y ago
    You can't even say that a product failed because nobody wanted it. All you can say is that nobody you asked was willing to pay what you were asking. I've seen plenty of promising products die because the company wants to only offer it as a service with ridiculous licensing requirements presumably out of fear that some customer is going to build a billion dollar business out of it and not give them a cut of the gross. It has to be really frustrating for startup CEOs to fold and then see a bad copy of their idea appear as free software and explode in popularity.
- tomhoward 6y ago
  Yep, that's what marketing is (having studied several subjects in it as part of my business degree back in the 90s). Marketing is not just a synonym for advertising and promotions, etc. Marketing is about finding/building/reaching a market for a product. It involves both identifying/creating a market, and identifying/creating a product for that market. Advertising/promotions is just a small (though expensive) part of it, but it's the part that the world sees, so laypeople can easily think that's all it is.
  - _9ijd 6y ago
    This is mind blowing to me if this is true. I didn’t take many business classes so I wasn’t exposed to this definition. I do run a startup and as others have eluded about startup tech CEOs I’m pretty bad at marketing. But saying that, I still can’t wrap my head around how a marketing person can identify a market or create a product for that market. I basically created the company cause I saw a need. It’s my job as CEO to make sure our company is laser focused on solving that need. Solving this need is basically our overall focus but I understand you are probably talking about marketing creating new markets within that scope. Our process of identifying and creating a product and market is all about meeting with potential customers and trying to solve their needs which is a combination of sales engineers and sales and tech leads being consultants and figuring out how our technology can solve their problem. I don’t see where marketing fits into this such that they could go out and create a new market and new product for us..i always thought marketing’s job was to help us better reach those markets, but I had no idea they could identify new markets and create products for those markets. Maybe we see are using different terminology.
    - nostrademons 6y ago
      I've heard marketing used with this definition. It's actually really common - most marketing textbooks and classes will start from the premise that the goal of marketing is to identify a market and better serve it, and then work forward from it. That said - I don't think marketing is a good goal for a startup, for the reasons enumerated here [1]. Basically, you can visualize the roles in a company like this: Concrete | Abstract ----------------------------------------- Tech | Programming | Architecture Customers | Sales | Marketing Employees | Managers | HR And in a startup, you don't want anything to be abstract, because there's too much room for error just getting the concrete stuff right. Everything in the right-hand column belongs in a big company, with millions of users and thousands of employees, because they deal with emergent phenomena that happens when you're huge. If you're thinking in those terms you'll get crushed by the big companies that actually do have all those resources, so startups need to focus on small niches that can grow. [1] https://genius.com/Jessica-livingston-why-startups-need-to-focus-on-sales-not-marketing-annotated https://genius.com/Jessica-livingston-why-startups-need-to-f...
- deleted 6y ago
  [deleted]
samspenc 6y ago
This was a surprisingly good read and data-driven. I found it surprising that the top reason for failure was product-market fit followed by team. I would have thought finance (#3) and tech (#4) would rank higher.
- awillen 6y ago
  I think finance and product-market fit go hand in hand, and it's a question of the founder's perception of which is more important. If you don't have a good product, you won't make any money, so for those startups it really depends whether the founder saw running out of money as the final blow or the fact that the product didn't find its market to be the overarching cause of things.
- MattGaiser 6y ago
  Customers really don’t seem to be all that picky about tech quality in many cases. I know a guy who got government SaaS and IoT contracts with little more than the knowledge of PHP for Dummies and Arduino. “It runs” is more than enough in most cases. You can get by with “it runs 90% of the time” too.
- toast0 6y ago
  Tech barely matters. If nobody wants your product, the right tech is a mock-up. If people want your product, but you can't deliver because of tech, that might be promising enough to get funding for a better team. The dependency on a 3rd party product that's pulled seems real and dangerous though; you can't have security if you're built on something you don't control and can't replace under pressure.
- vishnugupta 6y ago
  Amazon is littered with awesome tech that took 2-3 years to build and launch but failed because there was no market for it. I worked on one such product, a micro payments web service. It took me a while to realize that that’s just how Amazon operates. Carry out experiments all the time, most fail, but the ones who click take off spectacularly. As Bezos says, don’t take Hail Mary bet. Take smaller bets all the time.
HungryHarold 6y ago
Great article
awillen 6y ago
Good read with some really interesting information, but I don't know that I agree with the way it implies that there's a single, defining reason for failure. All of these things are intertwined - you can't get raise money if you don't have product market fit, and you can't bootstrap things if you aren't bringing in money. Team problems are tied into everything happening in the company. Tech problems are very much related to product market fit. Like I said - good information, but I guess it's really the pie chart that made me feel like they were oversimplifying things.
- heavenlyblue 6y ago
  Yeah, it’s sampling from a distribution where every company has problems in every one of those spheres they are mentioning, except only one of these issues will be the last one to finally finish the startup. So it’s more about sampling from what kind of issues are more prevalent in a startup rather than what kind of mistakes they will be making.
goatherders 6y ago
My experience consulting for many startups is that what is called "Value add" is a real problem at more than 2 or 3% of startups. The momentum of the status quo is really strong and only gets stronger the larger your target company. For example, getting a 5 person company with 4 engineers to try your new Dev tool is an order of magnitude easier than a company 10x that size which is an order of magnitude easier than a company 2x THAT size.
pontus 6y ago
These retrospective analyses, while intriguing to read, should be taken as more descriptive than prescriptive. When you talk to someone who actually succeeded at something, they'll talk about platitudes like working hard, product market fit, iterating, listening to customers, raising a lot of money or not raising too much money, and so on. Many people go so far as to try to emulate the behaviors of their "hero" (Jobs, Gates, Page/Brin, Zuck, ...), but that's a fools errand. In a similar way, these types of postmortems should not be taken as prescriptive. They too are full of platitudes.
- svachalek 6y ago
  I have worked for some companies that were total failures and some that were global successes. Having been through the failures first, I was excited to see how the magic worked at a massively successful company, but to be honest the differences are more subtle than anyone would believe. The big successes were happy to do things that had been disastrous at other companies in my experience, and did not pay much attention to the things that the popular press considered the secrets of their success. As disappointing as it is to think this way, it’s much like explaining the weather or the stock market. I think people need a story, but both inside and outside the company we are just guessing why a company fails or succeeds.
  - heymijo 6y ago
    Andy Rachleff, known for his articulation of product/market fit, says a company with a lock on product/market fit can do almost everything else wrong and still succeed. Google firing all of its managers early on in its existence is a great example of this.
    - physicles 6y ago
      It’s like Scott G says, better to be a mediocre company in a great market, than a superbly-managed company in a bad market.
- opportune 6y ago
  There is both a lot of survivorship bias and probably misattribution of what leads to failures and successes. I imagine a lot of it too is really indescribable, in the sense that a professional basketball player may write a blog post about how to play top-tier basketball, but reading won’t actually make me any better at basketball, nor will it give me the character/physical traits I need to be talented.
ttul 6y ago
Are these really "mistakes" or are they just the random process of value discovery, which naturally involves a lot of failures. Finding product-market fit is not something you can engineer with perfect foresight. You raise money, you build something, and then you have a limited time to see whether your hypothesis about the market was correct. Often, if not most of the time, you fail to get the fit you need in order to succeed. There are definitely execution failures, but in my experience spanning 20 years, I have seen far more failures that are really just failed experiments rather than execution failures. A half-decent team can get product-market fit; once you're there, attracting the people who won't fuck up the next phase is relatively easy. If you don't have product-market fit, no amount of genius will save your company.
- tmpz22 6y ago
  Random process of value discovery? This is entitled Software developers assuming they can jump into a completely different domain and instantly succeed. Sales? Fundraising? Business development? Operations? Logistics? Recruiting? Psh those losers make half of what I make I can do all their jobs at once no problem! Oh wait this is hard and I’m not good at it I’m going to wonderful journey my butt back to a cushy ad company.
  - askafriend 6y ago
    I think you totally misread the comment. The process of value discovery involves all the business, ops, marketing, etc people you're talking about (they would be hired with capital or equity). No one is saying they can do it on their own.
    - tmpz22 6y ago
      Startups that have good business, ops, marketing, etc people don’t fail in the first place.
      - askafriend 6y ago
        Yes they do.
RobinUS2 6y ago
Where should the primary responsibility for product market fit lie within a startup? E.g. product owner, CTO, CEO, .. ?
- stephenhess 6y ago
  CEO is the primary but everyone in a startup needs to take responsibility for this. The core goal of a startup is to discover a "scalable and repeatable" business model. https://steveblank.com/2010/01/25/whats-a-startup-first-principles/ https://steveblank.com/2010/01/25/whats-a-startup-first-prin...
- onion2k 6y ago
  CEO. The product owner should be finding what the customer needs, but as soon as you have more than one customer you'll have antagonistic pressures on what to implement next. It's up to the CEO to make the decision which customer needs to actually fulfil (with information and input from everyone else). It's up to the CTO to make those decisions happen in a way that doesn't stop the company doing more things in the future.
- petewailes 6y ago
  CMO. It's the result of the first decision the CMO makes (market strategy). In short - CMO, CEO, COO AND CFO set the overarching strategic objectives (2 or 3 generally), then that gets turned into a framework for strategy and decision making to enable actions to be evaluated, enacted and measured. At the highest level, the framework consists of: 1. Strategic aspirations - what are you aiming to do, and how will you judge the success or failure of those things? Goals, KPIs and success/failure criteria. 2. Where to compete (product category areas, pricing, distribution methods, experiential factors, communications and branding) 3. How to win - what will preferentially differentiate the offering, and how will it be distinctive against the market competitors. 4. Capabilities audit - what needs to be changed about what the organisation has/does in order to enable that, and how will the effects of that play out throughout the rest of the organisation? 5. Change management - how are those things going to be introduced/amended/reduced/removed and where does the responsibility lay for those changes? Everything the organisation does should be in support of the strategic objectives, and thought about in relation to that framework. As a result, the product-market fit comes as a result of product decisions, and how's it's positioned to the market is a result of the decisions for 2 and 3. Note that product-market fit isn't just about what the product does, but how what it does is communicated to the market. Both of those are vitally important, bit people tend to forget the comms part. If the org isn't big enough to have a CMO yet, then generally it devolves to the CEO. It's why start-ups tend to have crappy product-market fit - CEOs tend not to be great at understanding marketing.
inetknght 6y ago
My initial thoughts: > First hand lessons > over eighty failed startups I dunno... if you've got first hand experience in 80 startups then maybe their failures are because you didn't spend enough time in any single one of them. Then I read the article: > We've analyzed why +80 startups have failed If you've analyzed the startups then I really don't think that counts as "first hand".
- nothinghere789 6y ago
  first hand means you got the info from the first or original source.
  - RSZC 6y ago
    That's an unusual definition of first hand... Here's Merriam-Webster's: > obtained by, coming from, or being direct personal observation or experience These lessons are not from the OP's direct personal observation or experience.
  - jandrese 6y ago
    Isn't that second hand? You interviewed the people with first hand knowledge.
- dang 6y ago
  Ok we'll take the hands out of the title above.
wmab 6y ago
TLDR: Buy a copy of the Lean Startup, read it, action it.
- nostrademons 6y ago
  Note that following the lean startup method does not itself guarantee success. I know at least a half dozen founders who have followed the Lean Startup method (several of whom were actually in Steve Blank's class at Berkeley), and in all cases the result of their 100 interviews was "Welp, nobody wants that product." Which I guess is preferable to investing 3 years and $15M in venture capital into it, but it also doesn't get you any closer to a successful startup. (When I followed the Lean Startup method myself, it was actually worse - our 100 interviews said "Yes, we definitely want it", we built it, and then nobody used it. At least I took every engineering shortcut possible to build & validate it quickly and didn't waste time making it bulletproof before people tried it out.) Also interestingly, a large number of gigantic corporations today did not follow the Lean Startup method, and arguably weren't trying to found a startup at all. Apple, Google, Facebook, E-bay, Dropbox, AirBnB - they were founded because their founders were curious and trying to scratch their own itch, and it turned out lots of other people had that itch too. If I had to distill lessons learned from about a decade in startups (7.5 years founding ones of my own and 2.5 years working for other people), it'd be "Trust my emotions more, be curious, and quit trying to found a damn startup." The problem is that you need to judge new ideas emotionally rather than rationally, but when you have the "I'm going to build something awesome and get totally rich" mentality, it distorts all your emotions. Better to get rich by working in finance or for a FAANG, reserve some time on the side to explore, and only set out on your own when there's something incredibly exciting on the table.
12xo 6y ago
"By far the most common reason for shutdown was lack of product-market-fit which constituted more than half of the marketing mistakes" During the dotcom boom of the late 90's the issues in the Valley were often attributed to a lack of engineering talent. However, after the bust many founders and execs realized that their failures were not due to a lack of product and engineering talent, but that there were too many engineers putting out products that the market did not want or need. This study seems to validate that idea. Without a clear understanding of the market and how to reach your potential customers, your idea is likely not worth the time. Spend more time on understanding the market, and how to reach it, and you will have a much better chance at success.
motohagiography 6y ago
Are there any products that people really did want, for people who had the willingness and ability to pay for them, which are not in the market because of startup blunders? Put another way, other than being illegal, is there a problem that growth has not solved?
- andi999 6y ago
  Not having concrete examples, but the book 'crossing the chasm' claims, that the majority wont buy from you whatever you have and they need unless they know 2 other companies (succesfully) using your product. Supposedly the step from a few sales to fully tapping the market is hard even if you have great products.
nicocerdeira 6y ago
Hey HN. Founder of Failory here. Thanks so much for the positive & constructive feedback on the post. We aim to keep publishing more of these researches in order to make it possible to learn from other startups' failures. If you have any comments or feedback, you can drop me an email at nico[at]failory.com.
- gravypod 6y ago
  Do you have a breakdown of "Common Reasons For Startup Failure" by total funding amount bracket? Is there a trend?
  - nicocerdeira 6y ago
    We didn't find any significant correlation between funding and cause of failure. I guess, however, that this is because our data set was quite limited.
polote 6y ago
I really hate those kind of content. Would you listen to someone who built a wall which collapsed ? nope But you will tell me, if I can prevent the mistakes other made I will go further than them. Well I'm not so sure, for any mistake that someone thought they made there will be another person who identify this mistake as something which made them succeed. These kind of articles are just porn for people who are not putting enough hours in working toward their ideas. (And top x things that made us successful is as stupid)
- jrott 6y ago
  Yeah I feel like these articles always end up coming up with apple pie positions. Like talking to customers more is good advice probably but it’s also the most common most stated advice for early startups.
- mromanuk 6y ago
  > I really hate those kind of content. Would you listen to someone who built a wall which collapsed ? nope What if you knew that 90% of the walls built collapses. Would you listen? If you just listen to the 10% that achieved it, it just a matter of putting more hours: Now you are in survivorship-bias land. Yes, we all hate that success is a combination of talent + work + luck (aka random stuff we don't know and don't control). > These kind of articles are just porn for people who are not putting enough hours there is also success-porn.
- doonesbury 6y ago
  Sure the first 65% is work hard. But guess what? The last 35% is a much different ask that just does not succumb to that same hammer. As the immediate parent implies, wall building is not all or nothing. Even in statistically controlled manufacturing processes there is std deviation. Not learning from mistakes is itself a kind of arrogance. In fact the preferred model is neither arrogant rejection or passive adoption. To use an a sort of Bhuddist analogy, we listen carefully and extract the gold from the gold+useless ore in the wisdom we hear and refashion it into our own art. This requires decent teachers (suppliers of know how) but also decent students who are interested in real learning not passive regurgitation. Making our own art is demonstration of mastery and of appropriate internalization. It avoids the silly extremes of man as an island and man as an empty if pious vessel to be filled with rhetoric that we can grandstand on. Those of us in profitable and large organizations will see the same truths about market acceptance and customer approval in a modified way: often our organizations are too sterile and inward looking. Losing the customer starts slow but in that last quarter or two accelerates fast often with a profound finality to it.
api 6y ago
I think tech problems are under-represented. The thing about tech problems is that they don't show up as tech problems unless they are really bad. They usually show up in lack of product-market fit, lack of adoption, high turnover, and difficulty with sales and marketing. For example if you chose Electron for your app and put no effort whatsoever into slimming down what you are running inside, users might decide they don't want to use your app because it uses too much CPU and RAM. If you use a slow database as your SaaS app/site's backend, your site will be slow and users might bounce during trial. If you pick an unwieldy, bug-prone, or weird (a.k.a. hard to hire) technology you might experience a slow development cycle and find it hard to build enough features or fix enough problems. Most of the time people won't tell you these things. They'll just move on. Some of them are subconscious, like performance issues. The app just doesn't "feel" good, it's not a pleasure to use, etc. If you are trying to sell shit on a stick, your problem may not be marketing... but you can always blame it on marketing! If your stack makes your development cycle slow, maybe you're not finding product-market fit because you're hiking through the woods with an elephant strapped to your back. Good tech choices are fundament. They enable everything else to work well. You need everything else of course... good tech alone won't cut it. But the rest of your company's operations are going to flounder if they are not properly equipped or if the product sucks.
Ace__ 6y ago
I remember digging into the source material used in this article, and contacting the founder, not Nico, but the other gentleman, can't remember his name, an amicable friendly chap. Anyway, I said to him, that a lot of the founders, although I respect their transparency and willingness to talk about unfortunately failing, they appear blinkered to the reasons for their failure. I won't mention the founders reply. Looking at PMF in terms of: 1. The definition of PMF 2. How PMF is drummed into founders 3. The proposed criteria to evaluate PMF 4. The actual things to measure within the criteria I won't pull a number out of my backside to state to what degree PMF wasn't the issue, but I will say PMF was not the problem in some of the startups mentioned in the source material. In some cases PMF was not something they should have even been looking for at the stage they were at. Another reason that cropped up quite a few times. Bad Marketing. Putting growth over retention, automation and efficiency over learning and personally figuring out how to sell in person isn't bad marketing to me. That's a bad decision.
- mattmanser 6y ago
  Really confused by the last paragraph, what's a bad decision? Are you saying 1. focus on growth, automation and selling in person Or 2. focus on retention, learning, and automating sales Both of which seem inconsistent?
  - Ace__ 6y ago
    Hello Matt. I am saying, and I will elaborate: 1. Focusing on growth instead of retention in the early stages and certainly before PMF or at least strong indications of PMF, is a bad decision. 2. Focusing on automation and attempts at operational efficiencies when it comes to marketing and sales, again before PMF or at least strong indications of PMF is a bad decision. When it comes to growth, automation and attempts at operational efficiencies, you do that when there are strong signals. You don't cut out selling in person, till you have an acceptable closing rate. Even then, I would still recommend frequent selling in person to learn more until there are diminishing returns. Instead, you'll find an inordinate number of founders attempting to attain double-digit growth while there is triple digit churn. Automation of certain things like scraping lead lists, when the lists are nothing more than dump lists. Hacking things out, when what they should learn is discarded because the process towards the end-goal cuts out what they need to learn, take on-board and become intrinsic. Throwing up websites that are clones of well established competitors. Parroting without any deep understanding of why those things are on the site, of why those things need to be said. Oblivious to why they themselves are not in a position to say those things. I would really like to say more on this. I would call it a pet-peeve, but I got a zoo full of them. If you want to carry on the discussion in private, happy to do so, but for now, I got work to do. Cheers, Ace.
alexanderdou 6y ago
One of the big issues I always find with "Closed Lost Reasons"[1] like this is that it rarely captures the truth accurately. It misses the truth in a couple of ways: 1. Deliberate obfuscation by main actors who want to protect their jobs ("It is difficult to get a person to understand something, when their salary depends on their not understanding it.") 2. Continental drift- the farther you get from the action (or, more likely, the set of actions) that precipitated the event, the more you rely on memory and hearsay 3. "The Rage to Conclude"- humans LOVE denouement, to “know”, to have things wrapped up and make sense. But rarely is the world so simple. We try to boil a set of reasons down into one über-reason So on the factory floor, the people doing the labeling are incentivized to shift the blame and obfuscate their role in the loss. And then the manager is trying to sort through all the noise to identify which set of reasons is the most likely for this loss. There's a lot lost in translation from the "truth" of how the deal was actually lost. ------------------ With this particular article, I categorize it in "content marketing babble": advice that is generalized to the point that it is not useful to me. The Common Lessons section leaves me with general advice but no tractable ways to understand what that looks like in the real world with real constraints and stresses. IMO, the Lean: validation section could be extremely valuable IFF they supplied hard examples from the failed startup dataset that fueled this article. Like "Here are links to the case studies where the team behind [Closed Company A] felt that they could have spent more time validating before building. This is the featureset that they built prematurely, and here they ponder on ways they might have tested it cheaply" ------------------ All that aside: I've actually been quite an avid reader of Failory for a couple of months now. I check in every so often to go over new interviews. I think the interviews (https://www.failory.com/interview-failure https://www.failory.com/interview-failure) are a lot more useful: the format allows for more nuance, more context over the conditions of the business, and more reflection. I often find myself wanting to ask more questions in-line to the interviewee, kind of like a hyperspecific, morbid Quora question. [1] I'm co-opting this term from Sales/Marketing lingo. I originally wrote Root Cause Analysis, but I know that RCA has a very specific software definition and set of rituals, so I wanted to
- doonesbury 6y ago
  >Deliberate obfuscation by main actors who want to protect their jobs Sure. There is mal-adaptive behavior, and it's not consequence free. >rarely captures the truth accurately Accurately? There's nothing going on in your reply to suggest you have distinguished insight to anything. Throwing out three more modalities of problems amounts to what-aboutism. You have attempted to re-contextualize the original write-up as disingenuous something we see a lot of pointless political wrangling. The salient question is what we can agree on as to common failure modes, rather than that argue without intersection. No accounting can be complete, and beyond some level of specificity more detail is useless. We're looking for 20% of the causes that explain 80% of the bad outcomes. Think Chaos Report that had a good run in the 1990s.

230 points by mitchbob 6y ago

capnorange 6y ago

weird usage of the term "Marketing" to mean business related(product market fit, competition etc).

disease 6y ago
Event "product market fit" feels like a sugar-coated way to say that no one is interested in purchasing your product. I don't have a startup, but if I did I would view every single step in the process of creating one, both technical and non-technical, as an opportunity to test the market viability of your product. I'm honestly surprised at the abundance of non-product-viability issues that were cited as determining factors. Maybe this reality is hard to face?
- ska 6y ago
  but if I did I would view every single step... To a first approximation, everyone knows this and at least tells themselves it is what they are doing. The real problem is that is hard. In the vast majority of cases, much harder than the tech & engineering you are doing.
- jandrese 6y ago
  You can't even say that a product failed because nobody wanted it. All you can say is that nobody you asked was willing to pay what you were asking. I've seen plenty of promising products die because the company wants to only offer it as a service with ridiculous licensing requirements presumably out of fear that some customer is going to build a billion dollar business out of it and not give them a cut of the gross. It has to be really frustrating for startup CEOs to fold and then see a bad copy of their idea appear as free software and explode in popularity.
tomhoward 6y ago
Yep, that's what marketing is (having studied several subjects in it as part of my business degree back in the 90s). Marketing is not just a synonym for advertising and promotions, etc. Marketing is about finding/building/reaching a market for a product. It involves both identifying/creating a market, and identifying/creating a product for that market. Advertising/promotions is just a small (though expensive) part of it, but it's the part that the world sees, so laypeople can easily think that's all it is.
- _9ijd 6y ago
  This is mind blowing to me if this is true. I didn’t take many business classes so I wasn’t exposed to this definition. I do run a startup and as others have eluded about startup tech CEOs I’m pretty bad at marketing. But saying that, I still can’t wrap my head around how a marketing person can identify a market or create a product for that market. I basically created the company cause I saw a need. It’s my job as CEO to make sure our company is laser focused on solving that need. Solving this need is basically our overall focus but I understand you are probably talking about marketing creating new markets within that scope. Our process of identifying and creating a product and market is all about meeting with potential customers and trying to solve their needs which is a combination of sales engineers and sales and tech leads being consultants and figuring out how our technology can solve their problem. I don’t see where marketing fits into this such that they could go out and create a new market and new product for us..i always thought marketing’s job was to help us better reach those markets, but I had no idea they could identify new markets and create products for those markets. Maybe we see are using different terminology.
  - nostrademons 6y ago
    I've heard marketing used with this definition. It's actually really common - most marketing textbooks and classes will start from the premise that the goal of marketing is to identify a market and better serve it, and then work forward from it. That said - I don't think marketing is a good goal for a startup, for the reasons enumerated here [1]. Basically, you can visualize the roles in a company like this: Concrete | Abstract ----------------------------------------- Tech | Programming | Architecture Customers | Sales | Marketing Employees | Managers | HR And in a startup, you don't want anything to be abstract, because there's too much room for error just getting the concrete stuff right. Everything in the right-hand column belongs in a big company, with millions of users and thousands of employees, because they deal with emergent phenomena that happens when you're huge. If you're thinking in those terms you'll get crushed by the big companies that actually do have all those resources, so startups need to focus on small niches that can grow. [1] https://genius.com/Jessica-livingston-why-startups-need-to-focus-on-sales-not-marketing-annotated https://genius.com/Jessica-livingston-why-startups-need-to-f...
deleted 6y ago
[deleted]

samspenc 6y ago

This was a surprisingly good read and data-driven. I found it surprising that the top reason for failure was product-market fit followed by team. I would have thought finance (#3) and tech (#4) would rank higher.

awillen 6y ago
I think finance and product-market fit go hand in hand, and it's a question of the founder's perception of which is more important. If you don't have a good product, you won't make any money, so for those startups it really depends whether the founder saw running out of money as the final blow or the fact that the product didn't find its market to be the overarching cause of things.
MattGaiser 6y ago
Customers really don’t seem to be all that picky about tech quality in many cases. I know a guy who got government SaaS and IoT contracts with little more than the knowledge of PHP for Dummies and Arduino. “It runs” is more than enough in most cases. You can get by with “it runs 90% of the time” too.
toast0 6y ago
Tech barely matters. If nobody wants your product, the right tech is a mock-up. If people want your product, but you can't deliver because of tech, that might be promising enough to get funding for a better team. The dependency on a 3rd party product that's pulled seems real and dangerous though; you can't have security if you're built on something you don't control and can't replace under pressure.
vishnugupta 6y ago
Amazon is littered with awesome tech that took 2-3 years to build and launch but failed because there was no market for it. I worked on one such product, a micro payments web service. It took me a while to realize that that’s just how Amazon operates. Carry out experiments all the time, most fail, but the ones who click take off spectacularly. As Bezos says, don’t take Hail Mary bet. Take smaller bets all the time.

HungryHarold 6y ago

Great article

awillen 6y ago

Good read with some really interesting information, but I don't know that I agree with the way it implies that there's a single, defining reason for failure. All of these things are intertwined - you can't get raise money if you don't have product market fit, and you can't bootstrap things if you aren't bringing in money. Team problems are tied into everything happening in the company. Tech problems are very much related to product market fit. Like I said - good information, but I guess it's really the pie chart that made me feel like they were oversimplifying things.

heavenlyblue 6y ago
Yeah, it’s sampling from a distribution where every company has problems in every one of those spheres they are mentioning, except only one of these issues will be the last one to finally finish the startup. So it’s more about sampling from what kind of issues are more prevalent in a startup rather than what kind of mistakes they will be making.

goatherders 6y ago

My experience consulting for many startups is that what is called "Value add" is a real problem at more than 2 or 3% of startups. The momentum of the status quo is really strong and only gets stronger the larger your target company. For example, getting a 5 person company with 4 engineers to try your new Dev tool is an order of magnitude easier than a company 10x that size which is an order of magnitude easier than a company 2x THAT size.

pontus 6y ago

These retrospective analyses, while intriguing to read, should be taken as more descriptive than prescriptive. When you talk to someone who actually succeeded at something, they'll talk about platitudes like working hard, product market fit, iterating, listening to customers, raising a lot of money or not raising too much money, and so on. Many people go so far as to try to emulate the behaviors of their "hero" (Jobs, Gates, Page/Brin, Zuck, ...), but that's a fools errand. In a similar way, these types of postmortems should not be taken as prescriptive. They too are full of platitudes.

svachalek 6y ago
I have worked for some companies that were total failures and some that were global successes. Having been through the failures first, I was excited to see how the magic worked at a massively successful company, but to be honest the differences are more subtle than anyone would believe. The big successes were happy to do things that had been disastrous at other companies in my experience, and did not pay much attention to the things that the popular press considered the secrets of their success. As disappointing as it is to think this way, it’s much like explaining the weather or the stock market. I think people need a story, but both inside and outside the company we are just guessing why a company fails or succeeds.
- heymijo 6y ago
  Andy Rachleff, known for his articulation of product/market fit, says a company with a lock on product/market fit can do almost everything else wrong and still succeed. Google firing all of its managers early on in its existence is a great example of this.
  - physicles 6y ago
    It’s like Scott G says, better to be a mediocre company in a great market, than a superbly-managed company in a bad market.
opportune 6y ago
There is both a lot of survivorship bias and probably misattribution of what leads to failures and successes. I imagine a lot of it too is really indescribable, in the sense that a professional basketball player may write a blog post about how to play top-tier basketball, but reading won’t actually make me any better at basketball, nor will it give me the character/physical traits I need to be talented.

ttul 6y ago

Are these really "mistakes" or are they just the random process of value discovery, which naturally involves a lot of failures. Finding product-market fit is not something you can engineer with perfect foresight. You raise money, you build something, and then you have a limited time to see whether your hypothesis about the market was correct. Often, if not most of the time, you fail to get the fit you need in order to succeed. There are definitely execution failures, but in my experience spanning 20 years, I have seen far more failures that are really just failed experiments rather than execution failures. A half-decent team can get product-market fit; once you're there, attracting the people who won't fuck up the next phase is relatively easy. If you don't have product-market fit, no amount of genius will save your company.

tmpz22 6y ago
Random process of value discovery? This is entitled Software developers assuming they can jump into a completely different domain and instantly succeed. Sales? Fundraising? Business development? Operations? Logistics? Recruiting? Psh those losers make half of what I make I can do all their jobs at once no problem! Oh wait this is hard and I’m not good at it I’m going to wonderful journey my butt back to a cushy ad company.
- askafriend 6y ago
  I think you totally misread the comment. The process of value discovery involves all the business, ops, marketing, etc people you're talking about (they would be hired with capital or equity). No one is saying they can do it on their own.
  - tmpz22 6y ago
    Startups that have good business, ops, marketing, etc people don’t fail in the first place.
    - askafriend 6y ago
      Yes they do.

RobinUS2 6y ago

Where should the primary responsibility for product market fit lie within a startup? E.g. product owner, CTO, CEO, .. ?

stephenhess 6y ago
CEO is the primary but everyone in a startup needs to take responsibility for this. The core goal of a startup is to discover a "scalable and repeatable" business model. https://steveblank.com/2010/01/25/whats-a-startup-first-principles/ https://steveblank.com/2010/01/25/whats-a-startup-first-prin...
onion2k 6y ago
CEO. The product owner should be finding what the customer needs, but as soon as you have more than one customer you'll have antagonistic pressures on what to implement next. It's up to the CEO to make the decision which customer needs to actually fulfil (with information and input from everyone else). It's up to the CTO to make those decisions happen in a way that doesn't stop the company doing more things in the future.
petewailes 6y ago
CMO. It's the result of the first decision the CMO makes (market strategy). In short - CMO, CEO, COO AND CFO set the overarching strategic objectives (2 or 3 generally), then that gets turned into a framework for strategy and decision making to enable actions to be evaluated, enacted and measured. At the highest level, the framework consists of: 1. Strategic aspirations - what are you aiming to do, and how will you judge the success or failure of those things? Goals, KPIs and success/failure criteria. 2. Where to compete (product category areas, pricing, distribution methods, experiential factors, communications and branding) 3. How to win - what will preferentially differentiate the offering, and how will it be distinctive against the market competitors. 4. Capabilities audit - what needs to be changed about what the organisation has/does in order to enable that, and how will the effects of that play out throughout the rest of the organisation? 5. Change management - how are those things going to be introduced/amended/reduced/removed and where does the responsibility lay for those changes? Everything the organisation does should be in support of the strategic objectives, and thought about in relation to that framework. As a result, the product-market fit comes as a result of product decisions, and how's it's positioned to the market is a result of the decisions for 2 and 3. Note that product-market fit isn't just about what the product does, but how what it does is communicated to the market. Both of those are vitally important, bit people tend to forget the comms part. If the org isn't big enough to have a CMO yet, then generally it devolves to the CEO. It's why start-ups tend to have crappy product-market fit - CEOs tend not to be great at understanding marketing.

inetknght 6y ago

My initial thoughts: > First hand lessons > over eighty failed startups I dunno... if you've got first hand experience in 80 startups then maybe their failures are because you didn't spend enough time in any single one of them. Then I read the article: > We've analyzed why +80 startups have failed If you've analyzed the startups then I really don't think that counts as "first hand".

nothinghere789 6y ago
first hand means you got the info from the first or original source.
- RSZC 6y ago
  That's an unusual definition of first hand... Here's Merriam-Webster's: > obtained by, coming from, or being direct personal observation or experience These lessons are not from the OP's direct personal observation or experience.
- jandrese 6y ago
  Isn't that second hand? You interviewed the people with first hand knowledge.
dang 6y ago
Ok we'll take the hands out of the title above.

wmab 6y ago

TLDR: Buy a copy of the Lean Startup, read it, action it.

nostrademons 6y ago
Note that following the lean startup method does not itself guarantee success. I know at least a half dozen founders who have followed the Lean Startup method (several of whom were actually in Steve Blank's class at Berkeley), and in all cases the result of their 100 interviews was "Welp, nobody wants that product." Which I guess is preferable to investing 3 years and $15M in venture capital into it, but it also doesn't get you any closer to a successful startup. (When I followed the Lean Startup method myself, it was actually worse - our 100 interviews said "Yes, we definitely want it", we built it, and then nobody used it. At least I took every engineering shortcut possible to build & validate it quickly and didn't waste time making it bulletproof before people tried it out.) Also interestingly, a large number of gigantic corporations today did not follow the Lean Startup method, and arguably weren't trying to found a startup at all. Apple, Google, Facebook, E-bay, Dropbox, AirBnB - they were founded because their founders were curious and trying to scratch their own itch, and it turned out lots of other people had that itch too. If I had to distill lessons learned from about a decade in startups (7.5 years founding ones of my own and 2.5 years working for other people), it'd be "Trust my emotions more, be curious, and quit trying to found a damn startup." The problem is that you need to judge new ideas emotionally rather than rationally, but when you have the "I'm going to build something awesome and get totally rich" mentality, it distorts all your emotions. Better to get rich by working in finance or for a FAANG, reserve some time on the side to explore, and only set out on your own when there's something incredibly exciting on the table.

12xo 6y ago

"By far the most common reason for shutdown was lack of product-market-fit which constituted more than half of the marketing mistakes" During the dotcom boom of the late 90's the issues in the Valley were often attributed to a lack of engineering talent. However, after the bust many founders and execs realized that their failures were not due to a lack of product and engineering talent, but that there were too many engineers putting out products that the market did not want or need. This study seems to validate that idea. Without a clear understanding of the market and how to reach your potential customers, your idea is likely not worth the time. Spend more time on understanding the market, and how to reach it, and you will have a much better chance at success.

motohagiography 6y ago

Are there any products that people really did want, for people who had the willingness and ability to pay for them, which are not in the market because of startup blunders? Put another way, other than being illegal, is there a problem that growth has not solved?

andi999 6y ago
Not having concrete examples, but the book 'crossing the chasm' claims, that the majority wont buy from you whatever you have and they need unless they know 2 other companies (succesfully) using your product. Supposedly the step from a few sales to fully tapping the market is hard even if you have great products.

nicocerdeira 6y ago

Hey HN. Founder of Failory here. Thanks so much for the positive & constructive feedback on the post. We aim to keep publishing more of these researches in order to make it possible to learn from other startups' failures. If you have any comments or feedback, you can drop me an email at nico[at]failory.com.

gravypod 6y ago
Do you have a breakdown of "Common Reasons For Startup Failure" by total funding amount bracket? Is there a trend?
- nicocerdeira 6y ago
  We didn't find any significant correlation between funding and cause of failure. I guess, however, that this is because our data set was quite limited.

polote 6y ago

I really hate those kind of content. Would you listen to someone who built a wall which collapsed ? nope But you will tell me, if I can prevent the mistakes other made I will go further than them. Well I'm not so sure, for any mistake that someone thought they made there will be another person who identify this mistake as something which made them succeed. These kind of articles are just porn for people who are not putting enough hours in working toward their ideas. (And top x things that made us successful is as stupid)

jrott 6y ago
Yeah I feel like these articles always end up coming up with apple pie positions. Like talking to customers more is good advice probably but it’s also the most common most stated advice for early startups.
mromanuk 6y ago
> I really hate those kind of content. Would you listen to someone who built a wall which collapsed ? nope What if you knew that 90% of the walls built collapses. Would you listen? If you just listen to the 10% that achieved it, it just a matter of putting more hours: Now you are in survivorship-bias land. Yes, we all hate that success is a combination of talent + work + luck (aka random stuff we don't know and don't control). > These kind of articles are just porn for people who are not putting enough hours there is also success-porn.
doonesbury 6y ago
Sure the first 65% is work hard. But guess what? The last 35% is a much different ask that just does not succumb to that same hammer. As the immediate parent implies, wall building is not all or nothing. Even in statistically controlled manufacturing processes there is std deviation. Not learning from mistakes is itself a kind of arrogance. In fact the preferred model is neither arrogant rejection or passive adoption. To use an a sort of Bhuddist analogy, we listen carefully and extract the gold from the gold+useless ore in the wisdom we hear and refashion it into our own art. This requires decent teachers (suppliers of know how) but also decent students who are interested in real learning not passive regurgitation. Making our own art is demonstration of mastery and of appropriate internalization. It avoids the silly extremes of man as an island and man as an empty if pious vessel to be filled with rhetoric that we can grandstand on. Those of us in profitable and large organizations will see the same truths about market acceptance and customer approval in a modified way: often our organizations are too sterile and inward looking. Losing the customer starts slow but in that last quarter or two accelerates fast often with a profound finality to it.

api 6y ago

I think tech problems are under-represented. The thing about tech problems is that they don't show up as tech problems unless they are really bad. They usually show up in lack of product-market fit, lack of adoption, high turnover, and difficulty with sales and marketing. For example if you chose Electron for your app and put no effort whatsoever into slimming down what you are running inside, users might decide they don't want to use your app because it uses too much CPU and RAM. If you use a slow database as your SaaS app/site's backend, your site will be slow and users might bounce during trial. If you pick an unwieldy, bug-prone, or weird (a.k.a. hard to hire) technology you might experience a slow development cycle and find it hard to build enough features or fix enough problems. Most of the time people won't tell you these things. They'll just move on. Some of them are subconscious, like performance issues. The app just doesn't "feel" good, it's not a pleasure to use, etc. If you are trying to sell shit on a stick, your problem may not be marketing... but you can always blame it on marketing! If your stack makes your development cycle slow, maybe you're not finding product-market fit because you're hiking through the woods with an elephant strapped to your back. Good tech choices are fundament. They enable everything else to work well. You need everything else of course... good tech alone won't cut it. But the rest of your company's operations are going to flounder if they are not properly equipped or if the product sucks.

Ace__ 6y ago

I remember digging into the source material used in this article, and contacting the founder, not Nico, but the other gentleman, can't remember his name, an amicable friendly chap. Anyway, I said to him, that a lot of the founders, although I respect their transparency and willingness to talk about unfortunately failing, they appear blinkered to the reasons for their failure. I won't mention the founders reply. Looking at PMF in terms of: 1. The definition of PMF 2. How PMF is drummed into founders 3. The proposed criteria to evaluate PMF 4. The actual things to measure within the criteria I won't pull a number out of my backside to state to what degree PMF wasn't the issue, but I will say PMF was not the problem in some of the startups mentioned in the source material. In some cases PMF was not something they should have even been looking for at the stage they were at. Another reason that cropped up quite a few times. Bad Marketing. Putting growth over retention, automation and efficiency over learning and personally figuring out how to sell in person isn't bad marketing to me. That's a bad decision.

mattmanser 6y ago
Really confused by the last paragraph, what's a bad decision? Are you saying 1. focus on growth, automation and selling in person Or 2. focus on retention, learning, and automating sales Both of which seem inconsistent?
- Ace__ 6y ago
  Hello Matt. I am saying, and I will elaborate: 1. Focusing on growth instead of retention in the early stages and certainly before PMF or at least strong indications of PMF, is a bad decision. 2. Focusing on automation and attempts at operational efficiencies when it comes to marketing and sales, again before PMF or at least strong indications of PMF is a bad decision. When it comes to growth, automation and attempts at operational efficiencies, you do that when there are strong signals. You don't cut out selling in person, till you have an acceptable closing rate. Even then, I would still recommend frequent selling in person to learn more until there are diminishing returns. Instead, you'll find an inordinate number of founders attempting to attain double-digit growth while there is triple digit churn. Automation of certain things like scraping lead lists, when the lists are nothing more than dump lists. Hacking things out, when what they should learn is discarded because the process towards the end-goal cuts out what they need to learn, take on-board and become intrinsic. Throwing up websites that are clones of well established competitors. Parroting without any deep understanding of why those things are on the site, of why those things need to be said. Oblivious to why they themselves are not in a position to say those things. I would really like to say more on this. I would call it a pet-peeve, but I got a zoo full of them. If you want to carry on the discussion in private, happy to do so, but for now, I got work to do. Cheers, Ace.

alexanderdou 6y ago

One of the big issues I always find with "Closed Lost Reasons"[1] like this is that it rarely captures the truth accurately. It misses the truth in a couple of ways: 1. Deliberate obfuscation by main actors who want to protect their jobs ("It is difficult to get a person to understand something, when their salary depends on their not understanding it.") 2. Continental drift- the farther you get from the action (or, more likely, the set of actions) that precipitated the event, the more you rely on memory and hearsay 3. "The Rage to Conclude"- humans LOVE denouement, to “know”, to have things wrapped up and make sense. But rarely is the world so simple. We try to boil a set of reasons down into one über-reason So on the factory floor, the people doing the labeling are incentivized to shift the blame and obfuscate their role in the loss. And then the manager is trying to sort through all the noise to identify which set of reasons is the most likely for this loss. There's a lot lost in translation from the "truth" of how the deal was actually lost. ------------------ With this particular article, I categorize it in "content marketing babble": advice that is generalized to the point that it is not useful to me. The Common Lessons section leaves me with general advice but no tractable ways to understand what that looks like in the real world with real constraints and stresses. IMO, the Lean: validation section could be extremely valuable IFF they supplied hard examples from the failed startup dataset that fueled this article. Like "Here are links to the case studies where the team behind [Closed Company A] felt that they could have spent more time validating before building. This is the featureset that they built prematurely, and here they ponder on ways they might have tested it cheaply" ------------------ All that aside: I've actually been quite an avid reader of Failory for a couple of months now. I check in every so often to go over new interviews. I think the interviews (https://www.failory.com/interview-failure https://www.failory.com/interview-failure) are a lot more useful: the format allows for more nuance, more context over the conditions of the business, and more reflection. I often find myself wanting to ask more questions in-line to the interviewee, kind of like a hyperspecific, morbid Quora question. [1] I'm co-opting this term from Sales/Marketing lingo. I originally wrote Root Cause Analysis, but I know that RCA has a very specific software definition and set of rituals, so I wanted to

doonesbury 6y ago
>Deliberate obfuscation by main actors who want to protect their jobs Sure. There is mal-adaptive behavior, and it's not consequence free. >rarely captures the truth accurately Accurately? There's nothing going on in your reply to suggest you have distinguished insight to anything. Throwing out three more modalities of problems amounts to what-aboutism. You have attempted to re-contextualize the original write-up as disingenuous something we see a lot of pointless political wrangling. The salient question is what we can agree on as to common failure modes, rather than that argue without intersection. No accounting can be complete, and beyond some level of specificity more detail is useless. We're looking for 20% of the causes that explain 80% of the bad outcomes. Think Chaos Report that had a good run in the 1990s.