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> Most startups fail because they run out of money. This is one of those pointlessly technical truisms. Well, yeah, of course - it's not just startups; most co

> Most startups fail because they run out of money. This is one of those pointlessly technical truisms. Well, yeah, of course - it's not just startups; most companies of any kind fail because they run out of money. For businesses, that's really what failure is. You might have some regulatory or personal circumstance that causes a business to shut down before it runs out of money, but usually it's because your business was bringing in less than it was spending and you ran out of reserves before reversing that trend. It's like saying that most sports teams lose games because they score fewer points than their opponents; sure, you might have the rare case where too many of your players foul out and you can't field a big enough team, but usually it's the points thing.

deleted 4y ago
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ElevenLathe 4y ago
Most people die because their heart stops beating.
- 9dev 4y ago
  Now that's the kind of wrong causation that follows from using bad analogies :) most people’s hearts stop beating once they die, but there’s a myriad of reasons why they die in the first place - only some of which being a stopping heart.
version_five 4y ago
I think it can be more subtle than that. In many cases, it's not particularly hard to get money if you have traction and a pathway to scale and profitability. What's actually hard, even with money (again almost a pointless technical truism) is to make something that people want. I've been in multiple situations, including my own past business where we've got the money to do something (anything) but can't seem to get traction in a way that will allow the money to be deployed usefully. So if we just keep paying salaries and spending it on stuff we don't expect to work, yeah it's possible to fail by running out, but I wouldn't call that the reason. It's actually kind of an embarrassing way to fail, which is why I expect it's more common to just say you ran out of money. Deploying money in a way that generates returns is way harder than getting it.
Zetice 4y ago
Eh, while you're right, there's something to be said for focusing on the symptoms rather than the underlying condition. It's obviously problematic, but if the problems introduced by not solving the underlying issue are better than the problems you're currently dealing with, it might be a better way to move forward for awhile. At the very least it could help refocus a struggling founder; stop writing so many blog posts and start taking direct steps to address the biggest threat, running out of money.
zippergz 4y ago
Leave it to HN to bicker over the first sentence rather than engaging with the (useful, IMHO) advice in the rest of the article.
1123581321 4y ago
It's supposed to be a teachable shorthand for the idea that you are more likely to kill your startup by chasing enough growth to outrun spending than you are to improve your chances of success. That's a meaningful evaluation, not a truism. Using your sports analogy, it would be like a coach getting the attention of a bunch of hotshots to improve defense by telling them they need their opponents to score fewer points to win.
paxys 4y ago
Exactly. Most startups fail well before they run out of money. The money just keeps them on life support for a little bit longer. Cash management is obviously important but it isn't going to save your startup. If there isn't product market fit, competent leadership, good engineering, marketing, sales and the rest then you are done either way.
scott_w 4y ago
It’s only a truism if focusing on the cash wasn’t an area you could put focus on. Plenty of potentially successful startups fail because they manage their cash poorly, even when they have a product people want. As you can see from the article, you can put a specific focus on improving your cash position making it less likely to run out of money.

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ElevenLathe 4y ago

Most people die because their heart stops beating.

9dev 4y ago
Now that's the kind of wrong causation that follows from using bad analogies :) most people’s hearts stop beating once they die, but there’s a myriad of reasons why they die in the first place - only some of which being a stopping heart.

version_five 4y ago

I think it can be more subtle than that. In many cases, it's not particularly hard to get money if you have traction and a pathway to scale and profitability. What's actually hard, even with money (again almost a pointless technical truism) is to make something that people want. I've been in multiple situations, including my own past business where we've got the money to do something (anything) but can't seem to get traction in a way that will allow the money to be deployed usefully. So if we just keep paying salaries and spending it on stuff we don't expect to work, yeah it's possible to fail by running out, but I wouldn't call that the reason. It's actually kind of an embarrassing way to fail, which is why I expect it's more common to just say you ran out of money. Deploying money in a way that generates returns is way harder than getting it.

Zetice 4y ago

Eh, while you're right, there's something to be said for focusing on the symptoms rather than the underlying condition. It's obviously problematic, but if the problems introduced by not solving the underlying issue are better than the problems you're currently dealing with, it might be a better way to move forward for awhile. At the very least it could help refocus a struggling founder; stop writing so many blog posts and start taking direct steps to address the biggest threat, running out of money.

zippergz 4y ago

Leave it to HN to bicker over the first sentence rather than engaging with the (useful, IMHO) advice in the rest of the article.

1123581321 4y ago

It's supposed to be a teachable shorthand for the idea that you are more likely to kill your startup by chasing enough growth to outrun spending than you are to improve your chances of success. That's a meaningful evaluation, not a truism. Using your sports analogy, it would be like a coach getting the attention of a bunch of hotshots to improve defense by telling them they need their opponents to score fewer points to win.

paxys 4y ago

Exactly. Most startups fail well before they run out of money. The money just keeps them on life support for a little bit longer. Cash management is obviously important but it isn't going to save your startup. If there isn't product market fit, competent leadership, good engineering, marketing, sales and the rest then you are done either way.

scott_w 4y ago

It’s only a truism if focusing on the cash wasn’t an area you could put focus on. Plenty of potentially successful startups fail because they manage their cash poorly, even when they have a product people want. As you can see from the article, you can put a specific focus on improving your cash position making it less likely to run out of money.