why startups fail

The surprising reason why 90% of startups fail

Most startup founders dream of being the next Steve Jobs. Or Mark Zuckerberg. Or Elon Musk.

And nobody says they can’t. After all, haven’t we seen great grass to grace stories from startup communities world over? Haven’t we seen the likes of airbnb fail their way to success?

But here’s the thing startup founders: you won’t all be successful. Heck, according to forbes: 90% of you will fail.

Yes: 90%.

To put this into perspective: If you join an incubator/accelerator, with a cohort of 10 startups, odds are that only 1 of you will succeed. It’s just a matter of who.

The big questions have always been:

  • is there a specific determinant for success in a startup?
  • Can startup success be taught?
  • Is it a science? Is it an art?

While I may not be able to answer all those questions for you, I’ll instead focus on the reasons why most startups fail, then maybe you can work backwards and deduce what ingredients make a startup successful.

A study done in January 2016 by StatisticBrain highlights the following as the major causes of startup failure:

Major Cause Percentage of Failures Specific Pitfalls
1 Incompetence
46 %
Emotional Pricing
Living too high for the business
Nonpayment of taxes
No knowledge of pricing
Lack of planning
No knowledge of financing
No experience in record-keeping
2 Unbalanced Experience or Lack of Managerial Experience
30 %
Poor credit granting practices
Expansion too rapid
Inadequate borrowing practices
3 Lack of Experiences in line of goods or services
11 %
Carry inadequate inventory
No knowledge of suppliers
Wasted advertising budget
5 Neglect, fraud, disaster
1 %

Really interesting to see that a whooping 46% of startups died because of incompetence, and even more worrying is that the no. 1 specific cause was “Emotional pricing”.

Even the more interesting, only less than 1% of startups died because of a disaster. See, God want’s you to succeed.

Well, now you know. Is your startup going to die because of any of these reasons?

And do you agree with the study?

 

 

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