Getting clear about why startups fail - the real truths behind failure(not for the faint-hearted)

I recently read a post about startups & why they fail. Given my background in startups, (15 personally, and hundreds in conversation), I couldn't help but address this mis-information.

The key reasons early stage businesses and startups fail is often a lack of 3 things: 

1. Clarity - about ‘who’ they are and what problem they solve in the market. 
2. Financial Mastery – knowing what to measure and what it all means (including how well their current marketing efforts are working) 
3. An Action Plan - that includes specific targets and strategies to ensure they stay focused.

However, Our team of 27 Mentors & advisors (who between them have helped thousands of startups) all agree

THESE 3 reasons ARE WRONG

Worse, taking this advice will cause you to focus on solving the wrong problems.

Not all advice is equal. Let me be frank. There are a lot of people out there giving advice on startups, that have never done one themselves, or worse, have never 'failed'.

But don't just take my word for it (which is the point of the article). Here's what a few 'failures' had to say on the topic.

The great NFL football coach, Tommy Lasorda famously said "About the only problem with success is that it does not teach you how to deal with failure". 

"Many of life's failures are people who did not realize how close they were to success when they gave up." -Thomas Alva Edison

"Develop success from failures. Discouragement and failure are two of the surest stepping stones to success." -Dale Carnegie

"I learned more from the one restaurant that didn't work than from all the ones that were successes." -Wolfgang Puck

"My imperfections and failures are as much a blessing from God as my successes and my talents and I lay them both at his feet." -Mahatma Gandhi

"Anyone who has never made a mistake has never tried anything new." -Albert Einstein

So let's get to it. 

There are 8 real reasons why startups fail,  and they boil down to 2 indesputable truths as to why entrepreneurs fail.

The 8 Reasons. 

1. You have the wrong, poor or mis-aligned guidance, or you don't heed it. 

(Note:, the rest all follow from this first one)

2. Your business model is flawed.

3. Your personal life sucks

4. Your team is weak, or non-existant.

5. Your strategy is mis-aligned with your vision. 

6. Your message is incongruent with your offering, or poorly crafted or delivered.

7. Your execution is 'sub-optimal'.

8. Your Resourcing skills  (finding customers, partners, suppliers, supporters, JVs, funders, fans, advocates) are not aligned with your capabilities. 

And the the great news is, because these things is these are all your responsibility, they are also within your control. 

There-in lies your opportunity. (And my own, for that matter).

And the 2 indisputable truths?

1. Your reason 'why' is not strong enough, or

2. Your compelling 'vision' is not big enough or powerful enough. 

Here's the best part. If you address the 2 first, you are halfway to fixing the 8 reasons. 

Again, don't take my word for it. Find out for yourself. Ask your own mentor/ advisors -show them this email. The clever ones might even manage a wry smile. 

If you'd like to learn more, we are about to launch 3 new weekly podcast series, the 1st of which is called 'Rising STARtupS' for startups, by startups, about (you guessed it)....starting up. 

We'll be promoting the podcasts through our meetup & LinkedIn groups, so join that & you'll get the updates. 

And please share this with that person you know that has been talking for ages about starting 'one-day', and with your 'tribe'. 

Have a great day

Daniel Mumby

CEO & Founder

StartUp Foundation

- The Startup Accelerator for Professionals

- Presenter - Rising STARtupS Podcasts

- Events Co-Ordinator - Startling StartUp Ideas

Calling a digital startup 'tech' is so un-inclusive

'Tech' is so extremely un-inclusive; there are so few women, non-technical, or professionals, or business-development people, for that matter. They are not representative of all classes of entrepreneurs (but then again, neither are plumbers). 

What really is a 'tech' startup, anyway? 

Some will tell you that its a bunch of post-pubescent hoody-wearing, 'whiz-kids' all sitting together with laptops, building something 'cool'. 

Or perhaps someone with an online store, that sells widgets direct to the world from their garage? (That widget business must be booming).

Still others say that its a Venture Capital-backed (VC), technology-based company, based out of Silicon Valley, who are writing code, so that they will one day take over the world (or some other grandiose phrase).

No, a tech startup is simply a stage of a business entity, which predominately uses technology as the basis of its product, service delivery, or marketing mechanisms. (Which hopefully excludes fish & chip shops, franchises, management consultancies and life coaches).

I've come to recognise that 'tech-startup' really means "digital, disruptive, scalable and "enterprise-ready" businesses. (Note the emphasis on the last).

What about online businesses. aren't they tech startups too?

So often, even an online retailer will be lumped into the category of 'tech startup', though for $100, you can buy a trading & domain name, get a web-hosting account, setup a free online store, buy a cookie-cutter template and call yourself one.

Most of the industry reports analysing the startup space exclude them, though strangely, they are highly prevalent in pitching competitions and in VC reports like TechCrunch. 

So what about Google, Twitter, eBay, Paypal, Shoes of Prey etc. ? Aren't they innovative tech startups?

Well no, but many of them once were 'tech startups' (more on this in a minute).

Sure, there are many new form of innovation that come with those business models, but its are hardly 'innovation' in its purest sense. 

Consider this. Isn't Google (who make their money primarily from selling advertising), just the Yellow Pages online? Isn't Twitter just SMS for anyone with a smartphone? eBay just an online version of the old 'Trading Post'? (any 'The Castle' fans will be chiming in right here);  Paypal just an electonic version of a passbook savings account? Or Shoes of Prey just Williams the Shoeman online?

(Now before you get all up in arms, I'm am being a bit tongue-in-cheek here)

But, a solar/electric car, or clean fuel, or hi-speed rail, or cold-fusion, or break-through medical technologies that cure cancer or help paraplegics walk again etc? These are real forms of innovation. Its unfortunate that we see so few of these. (Though perhaps not for long).

So will I have to learn to code to become part of this 'digital revolution'?

I believe, that this is short stage in a larger cycle of growth, has occured in the same way as any other product or market lifecycle. The 'whiz-kids' are just the early-adopters of new business models, and methods of reaching or creating new markets. 

And this phase has been held artificially held over by the barriers to entry of technical capacity.  Its not that young graduates have better or more ideas; they simply have the life circumstances and the skills to build something and risk failure, where other more experienced people cant. 

When the rest of the business world catches up (as it has and will throughout history) those 'whiz-kids' will either have to run keep pace, or they will be over-run or swallowed up by those more experienced, more connected, more-capable and higher-achieving in the business community. And with it will go the ridiculous valuations (high & low) which seem to predominate the tech news cycles. 

By the way, I am in no way suggesting that we will be returning to the era of pre-industrial revolution. I do however recognise that we are at the dawn of a new era of revolution - the Age of the Entrepreneur.  

And now the barriers are coming down. I can hire a development team in Croatia, a sales team in Norway, a server in the cloud, a customer service team in the phillipines, a virtual assistant, and handle all of my marketing, advertising, PR, billing, accounting & administration online, all for less than a couple of full-time employees. Soon, the rest of my business needs, like strategy, legal & advisory will go that way too. 

At a very real and discernible point in the near-future, the focus of entrepreneurship in digital (tech, if you can't yet see it), will switch, driven by funders, founders and governments alike, to people who have the skills & capacity to imagine, build & scale an enterprise-ready business, not write code in a garage. 

So forget learning to code. 

Instead, learn to imagine, dream, build relationships, connect with people, prioritise, teach, develop products, build teams, identify & reach markets, solve real-world problems, share stories, and in doing so, live your dreams. 

This is how we will cure cancer, travel to stars, heal our planet, feed & clothe the world, and claim back our planet & our heritage, and become the people we were always meant to be. 

Because instead, in spending your time learning to code (as the advocates are now so loudly telling you), you could just be shortchanging your own, your family's, and the world's future. 

So what makes you such an expert on these things?

Actually, I'm not. 

I'm not a VC - few of those who are, have never risked their own money, or themselves spilt their blood, sweat, tears & years to build a startup (apologies for including those that have, eg @Hunterwalk).

I don't write code for a job, although I learnt to code as a teenager, and cut my teeth on Fortran, Pascal, Basic, Cobol before most whizkids' parents were out of high school. (And I know my way around HTML5/CSS & UX/UI).

What I have done, is 15+ Startups since '97, In social networking, hospitality, broadband, logistics, financial services, manufacturing, web-development, and hell's-bell's, even politics. And four not-for-profits. 

Before this, I had a long professional career in marketing and business development in business services, through the IT, manufacturing, logistics and building industries (industries which, despite what you may read in the tabloid press, will remain mainstays of our economy for decades to come). 

I don't claim to speak for the 'startup' industry as it currently stands. (In fact, most of what I talk about is at odds with it). I talk about the views, values, perspective & experience, as someone who has actually walked the startup path that so many aspire to. 

My audience, or 'tribe', are experienced professionals, who have a great idea, and arent sure what to do next.

If that's you, there I'd love to hear your idea, tell your story & help your achieve your vision of innovation. 

We might even change the world together. 

Twitter & Facebook: StartupFoundtn

Web: StartUpFoundation.com.au

Podcasts: RisingSTARtupS

MeetUps: Startling StartUp Ideas

LinkedIn: StartUp-Foundation-AU

Note the quasi-legal disclaimer: all brands mentioned here are property of their respective legal trademark owners, and no affiliation, validation, mis-representation or commercial promotion is here-by claimed or intended (even if it seemed like it).

Are you on track with your startup idea, or 'pushing s#!t uphill"?

Time and again in customer conversations, I am reminded of why I'm building my current startup, (Startupfoundation.com.au).  Daily, I hear "That's exactly what I've been looking for", or "Where were you when I started x years ago?"

If you are talking to potential customers and not hearing those phrases, then you have a problem. A big one.

They (customers) might not care about your solution to their problem. Or perhaps you don't really understand their problems, or they just don't think you do.

Either way, you are now (and apologies for the vernacular) "pushing s#!t uphill", as we say downunder. Every 'conversion' is a battle, every conversation is a firefight, every sale is an Everest.  But it shouldnt be.

If "Minimum Viable Product", is a flawed propositon for you (as it is for many startups, such as for those by experienced professionals), why not start with a "Minimum Desirable Product"? 

Why not build something that not only solves the customers' problems, but that they care about enough to actually want to put down their hard-earned-readies for? Why not meet their needs the first time round, instead of taking 6 or 10 iteratons to get there, and alienating many of your ealy potential customers in the process?

I could describe in detail the difficulities of finding, & the very high cost of acquisition, for obtaining early leads. But its a simple fact; if your market loves your products 12 months sooner, that's 12 months of 'extra' conversions, referrals, revenue, repeat buiness, PR etc. Its probably the difference between you running out of 'runway' (personal or business capacity) and making it your next milestone. In short, the difference between succes & failure. 

So, before you build your 'product', let me ask you this. Would you hire a housing builder to build your dream home using an MVP, and then 'test & iterate' or would you want it done in a more desirable way?

Perhaps its time for a whole new way of thinking for building a digital startup. Perhaps its time to think about how to imagine the endgame & then reverse engineer the process, so that you start with a solid foundation. 

Or perhaps we should just change the way that we build houses?

Who to believe when 2 opposing views miss the point about VC funding?

StartUpSmart published an article recently about the state of VC in Australia, and called out TechCrunch on some key data. 

http://www.startupsmart.com.au/financing-a-business/venture-capital/techcrunch-calls-out-australias-venture-capital-issues-investors-respond/2014042312147.html

However, I think both groups miss the point. As i highlighted in the (improved) comments.

 

"Its a interesting fact that Australian startups are seeking funding from overseas (typically the US) even at an earlier stage. Is it because Australia is not prepared to invest in Australian companies?

According to the last year's PWC report, the total amount invested in early stage startups in 2012 was $53m, and credible sources put the amount 2013 figure at 25% less, or $40m. 

The astounding fact is that there's a majority of founders, possibly 1200-1500,  (>80% of total new digital) startups pitching for this very small pool of funds.

Does this make you wonder why?

Perhaps its because investors know something that VCs, or us as founders, don't. Startups in Australia have yet to tap into our core strengths in the markets in which we have so much domain expertise. 

I hear so often that we should try and become more like silicon valley. With a (relativity) small consumer economy, we punch well above our weight (in GDP terms) in B2B/B2E. Eg mining, agriculture, manufacturing, healthcare, services, forestry, distribution (the list is very large) etc, yet we as a startup eceosystem, are all still focussed on building and finding 'unicorns' in consumer markets.

And we have at least 2 of the largest untapped funding pools available in the world. 

When we (startups) start building in sectors in which we can hold our own, funders (high net worth individuals, wholesale & retail funds, corporate investors and overseas investors alike) will flood the market with fiscal 'solutions'. 

I say that the fault is not one of funding, but of our own making, by not creating truly fundable opportunities.

As founders, we need to look to our areas of expertise, and hold our ground with conviction, when pitching these new ideas, instead of bending in the direction of every new breeze that blows. 

Instead of looking without, we should first be looking within."

Do you LOVE what you do?

I truly believe that if something isn't fun, or that you can't make it fun, or at least have fun doing it (what ever it is), then you probably shouldn't be doing it. 

In fact, you should do something, anything else. 

We spend so much time doing 'something' as a profession, career or vocation; why not make it significant, engaging, and enjoyable?

Of course, for some people, doing something that isn't fun, is often about money, or other reasons; a means to an end, keeping up appearances, meeting others' expectations, or climbing a ladder. 

But I'm not speaking to that audience. I talking to those of you who are seeking your life's purpose; doing your 'thing', which will lead you to a life of significance & meaning. 

In seeking to achieve that through startup success, if you have a partner, there is something that you absolutely must do before, during & after your startup. You have an obligation to bring that person 'with you' on the journey. 

First and foremost, aren't you building something so that you and your partner can have a better life together? So why wouldn't you want to share the highs and lows?

Celebrate the successes? Share in the learning?

After all, if it really is all about the journey, isn't it also about who you share that journey with? 

I was married for many years to a very fearful person. Her main expression was 'There's no fun until the work is done'. And this is not an uncommon attitude. There are many people in the world who cannot 'let go', who have to own the process & micro manage it to its conclusion before they can relax. 

And yet, that holds them back from obtaining a state of 'flow', a positive, inspiring state of creativity, passion & productivity. Its exactly that state you need to get to in building a startup, where people just cant wait to engage with you. 

For reasons not relevant here, I am no longer with that person (though I harbour no resentment), but obviously there was a mis-match of psyches. This is a scarcity mentality, not one of abundance. (If you aren't sure what I mean, there are are some great books on the topic, but my favourite is 'Blue Ocean Strategy').

Some-one with that sort of attitude, will probably never understand the mentality required to create a startup (whether successful or not). The ebbs & flows of the tides of our world are too strong, too overwhelming, too uncontrollable. 

So before you quit your day job to do the thing that you've always wanted to (whether a startup or something else), think about your partner, and what they need; talk with them about where you want to go, and why. And then start thinking about positive strategies to bridge any gaps. 

And if you want to give yourself the best chance of success, do this with the advice, support & guidance, of a suitably experienced coach, advisor or mentor. 

Then you can love what you do, and so will the person that you love. That, my friends, is half the battle won right there, before even a single shot has been fired. 

"StartUp success" is moving from one failure to another with enthusiasm

I started writing "The Great Escape" late last year, with a view to sharing some of my experiences with other experienced professionals, about the challenges in making a 'leap of faith'. 

"Easy", I thought, "I can do that". 

What I realised in the process, is that the art of writing isnt like writing a business plan, a strategy, or even an instructional "startups for dummies" guide. 

No, writing is about personalising -making the content relevant to your audience, in a relatable way. Sharing a part of yourself, so that the person reading the book, can take that information in & the apply it, in a meaningful & substantial way in their own lives. 

The opportunity in doing that (there is opportunity in every challenge), for every author is in 'peeling back the layers' of your life experiences, in order to share the hard truths. 

A little like building a startup career.  

Building a singular startup is often an iterative process of product building - 'build, feedback, learn, improve, repeat'. But building a startup career is something different - it introduces an unknown and changing variable -people. 

No matter where you start, or where you end up, suddenly there are people in the process - partners, funders, users, influencers, collaborators, supporters, even customers, who are all people, all of whom have there their own desires, objectives, needs and often, agendas. We form relationships, influences, share stories, and gradually let many of these people into the fabric of our lives, until one day, they form part of it.

Thats where then unpredictable element comes in. Suddenly, we cannot make decisions just on on the basis alone of what we learn; we also make decisions on the basis of how people will feel. 

For instance, imagine you receive guidance from a wise mentor, which seems at odds with where your feedback loop tells you that you should head. Early, the decision is easier. As you grow and learn, you come to realise that 'perspective' is in itself a wonderful feedback mechanism. And in not taking the perspective of the mentor, there are implications to the future of feedback & guidance as a result. Because we are dealing with people. 

I imagine that this is true not just in startups, but in any artisan craft -music, art, in fact in any profession. 

At that point, the failure of any one venture ceases to have less relevance in the overall scheme of things. Failure & success are objective measures, but touching, impacting, changing people, creating real human feeling and emotions? I'm not sure that there's a set of measurable metrics for that - and thank goodness, in my opinion. 

And that frees you to move to your most influential creative state, in becoming your ultimate creativite self. 

Sudenly, no longer is 'failure' negative. Like the songwriter or performer who ceases to deliver the 'popular hit', and seeks to craft the message of her soul, and in doing so, acheives a status and level of creativity that often leads them to a whole new level of audience. I could list hundreds of names here, but a few will suffice -Lennon, Madonna, Clapton, Springsteen.

At a point in their careers, they all stopped creating for the hit, and started creating for the feeling. 

And if you stay in the game long enough, so will you.