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

What is Startup Success really?

Why 15 startups? Can't you succeed at anything?

Great insight often comes from great guidance. One of my newer mentors (who didn't know much of my history) asked this question of me yesterday. 

Not because he was trying to be rude or critical, but because he recognised that anyone from outside of the startup space would genuinely ask that question. And it's a valid one. 

What do you call a success?

Is it a startup that went on to make it's founders millionaires? 

And what is failure?

Is it a failure to properly execute a strategy? To launch prematurely?

Or is it an idea that has inherenent weakness (as most do) that cant easily be overcome?

Or perhaps its an interesting idea, that you successfully launched but later ran out of resources (team/money/ execution) for? 

Or hits a unanswerable questions or barriers (such as scalability/ licencing/ politics/ market) ?

Or a launched business that you later closed because there was substantial risk (eg of itself of being disrupted)?  

Or perhaps you didn't know/ learn/ do / listen enough?

Or one of a hundred other reasons.

These are interesting questions, at least to me, and perhaps to a few other entrepreneurs. 

What I do know, is that the average number of projects that an entrepreneur has attempted before reaching substantial success (what ever that is) as a Founder (as opposed to an investor) appears to be between 8-14, according to the wise advice of 2 of my great mentors. 

Why is that important?

Because for every 1000 entrepreneurs who start the race, only a few will ever make it to this mythical finishing line (or perhaps its just a new starting line). 

Let me expand. A recent report by PWC, analysed the dropout rates of failed startups in Australia as being about 60%, which means that founder retry rates are 40%.

For example, in any one year if you had a cohort of 1000 aspiring entrepreneurs that had failed on their 1st attempt, 600 would leave, and 400 would retry. 

(In the absence of any data about the return rates of subsequent founders, we can only use that continuing ratio). 

So of the 400 that retry, (and because most of these will fail), only about 160 of these will go on to try a third time, and 64 a fourth, 25 a fifth. 

By the end of the time series that marks the 6th attempt, from the original cohort of 1000, we would have a very interesting statistic.

Only a handful of entrepreneurs will have successes, and an equivalent handful number will have achieved failure, both over approximately the same time scale. 

Both will have learned similar things, such as how to build & resource teams, overcome adversity, build connections, obtain great guidance, craft and deliver a compelling story, and engage an audience. 

Some will say that the main difference will likely only be the size of their wallets. 

However, one group will be disproportionately stronger in another area.

You can't buy it, borrow it, or lease it (though some might try to fake it). 

And once you have it, it can't be take from you. 

Character. 

Character comes not from money - it comes from facing & overcoming adversity. 

It is what defines, and refines you. It says what you will, or won't stand for. 

Character forces you to search your soul for who you really are. 

Character comes from standing against the small voice in your mind that tells you to take the 'easy' shortcut. 

Character comes from pushing on, when all about you have fallen, or given up, or taken the easy path.  

Character tells you get up again after you fall down. 

Character will cause others to rally around you when you fall, and reach out to you, to help you to your feet again

Character, is the compelling and endearing qualities of your integrity, values and standards, all wrapped up. 

Success is Character.

Do you need a 'lighthouse' or 'a torch'?

Traditional wisdom says that to build a successful startup, that you must put your head down and relentlessly build, create, engage, pitch, compete, push, test, iterate, sell, etc etc, for 3-5 years, until you've achieved some measure of success, and then you can give back to your local startup community.

That is, become a lighthouse - "the shining light on the cliffs", to help others avoid the rocks of their journey.
This premise assumes that most of the people are already out on boats, and 'out to sea', and not walking through rough terrain on the land with no light to guide them. Which is often wrong.

Like explorers of old, entrepreneurs who've already launched their 'ships', have already hired their boats, financed their journey,  assembled their crews, charted their courses on maps, loaded the supplies for the journey and consulted others who've made the voyage before them. They know where they are going, and why.

However, the majority of startup ideas people are still on the cliffs above the shore. They still have all that to do before them. But first, they still have to clamber down through rocky cliffs just to reach the harbour. Most wont make it this far- many will lose their way and become lost in the night. Some will give up and turn back towards home, or lose their grip and fall, with their hopes & dreams dashed on the rocks far below.

Some will end up at the wrong harbour. Others will arrive, with no money to hire the crew & boats that they need; others still will find no suitable boat available, or that the journey they've planned isn't possible, viable or worthwhile. 
(There may be another post in this about pirates, mutinies, and ships lost at sea, but I'll save that for another day).

So I'll come back to this story in a moment.

We are building our startup and you want to do ....'What'?
"Yes, we are right in the middle of the build phase of our startup, and I want to put aside some time to help grow the startup community", was the conversation I had with one of my co-founders.

I had just told him that I had started up, not just a local meetup to help other startups, but also structured it as a 'group anywhere' (to encourage others to syndicate it) AND a LinkedIn group for online collaboration.

In order for our own venture to succeed, we also need as many of our brethren as possible, to reach the harbour, prepared and willing to continue their own journey.

They first need torches to make it down safely from the cliffs, before they need lighthouses.
Not only do we have all the torches we need, but we have torches to share. And to help our fellow journeyman, all we have to hand them out, and light them. (For some of you younger folk, there were torches of a different sort, in the days before batteries).

He looked at me incredulously for a minute..... And then the light went on in him too. 
So are you 'sharing your light' whilst still on the shore, or are you waiting until you've returned from your successful voyage?

If you want to shine your light, and are nearby, join us at Startling Startup Ideas Group Melbourne.

This group is "Q&A for Startups". The first local group (Melbourne) is now live, and we expect to begin planning our first events soon.

http://meetup.com/Startling-Startup-Ideas-Group-Melbourne
It's based around user-driven topics to help you start, launch or grow, so tell us -
-which topics are most important to you and
-which ones that you want first (and suggest others), decided by group voting.
For those of you that are in interstate or overseas locations, there's also an opportunity to join an online conversation, or expand the concept via syndicated meetups, so don't feel left out.
You can join & share the online conversation at http://www.linkedin.com/groups/Startling-Startup-Ideas-Group-6669314
Or, if you believe as we do, and would like to expand the face-to-face concept, reach out to me on Twitter @That_StartUpGuy or visit http://www.meetup.com/Startling-Startup-Ideas/
This is an initiative that is being supported by my newest startup, StartUp Foundation, which is 5 Stage venture Accelerator for experienced professionals. 

At StartUpFoundation.com.au, you can find out the 8 success factors which make the difference between massive success & failure in a startup - and they have almost nothing to do with which 'methodology' you use. Lets help you take your great ideas, and use them to help you break free from your day job and make that 'Leap of Faith'.