Reasons Startups Fail: An Integral Perspective

by Jul 1, 2016

Less than 50% of all new companies make it beyond the 5-year mark (see e.g. data for Germany) and they fail due to a wide variety of reasons. We have mapped the insights of two different reports that analyse the reasons of startup failure onto the four quadrants of integral venture development. Our aim is to provide founders with a map to consciously navigate and mitigate the diverse risks of a startup and develop its unique potentials in a structured way.

Startup Failure: Post Mortem Analysis

Based on an analysis of ‘post mortems’ (startup founders and investors analysing their venture’s failures) of more than 100 startups, CB Insights identified the Top 20 reasons of startup failure in their report. The top three reasons cited in the report:

  1. Building a solution looking for a problem – i.e. not targeting a market need.
  2. Running out of cash.
  3. Not the right team.

Startup Failure: Premature Scaling

According to the Startup Genome Project, 74% of (high tech) startups fail due to premature scaling. Their report analyses data of more than 3.200 startups. Three key findings (more on page 8 in the report):

  • Founders that learn are more successful.
  • Premature scaling is the most common reason for startups to perform badly. Startups can prematurely scale their team, their customer acquisition strategies or over build the product.
  • Most successful founders are driven by impact rather than experience or money.