“In the life of a start-up there are two key periods: before adjustment of the product/market pairing, and afterwards. Once the pairing is properly adjusted, success is generally guaranteed.”
Marc Andreessen, co-founder of Mosaic and founder of Netscape.
For a company starting up in the digital sector, the first five years are the real test: only two start-ups in three survive them. However, failure is not inevitable. It’s always possible to reduce the risks, but first you have to know what they are! To help, exaegis has identified the 20 most frequent causes of start-up failure1. At the head of the pack is a poor understanding of the market, weak cashflow and an unsuitable team. Errors that sometimes could have been avoided: success requires planning.
- Not responding to a precise market need (42%)
Success involves identifying a genuine customer need.
- Lack of cash (29%)
To have a solid foundation, you need to have good capital, know how to convince investors and not live beyond your means.
- Not having the right people (23%)
To perform well, a team must be motivated, qualified and share a common vision.
- Being overtaken (19%)
To ensure that one solution is not quickly overtaken by another, attention must be paid to detail: technological choices, financing, motivation.
- Developing a product that is too expensive (18%)
A good product that is too expensive to produce may result in commercial under-performance.
- Disappointing users (17%)
If the product is poor or unsuitable, users will reject it.
- Starting up without a business model (17%)
All business projects must be based on a business model which sets out well in advance how the service will be monetized.
- Under-estimating the marketing (14%)
Without an adequate marketing strategy, even the best products will have difficulty finding their market and being visible.
- Ignoring customers (14%)
Customer satisfaction depends to a large degree on the capacity of a company to deal with complaints or comments.
- Incorrectly assessing the “time to market” (13%)
Launching a product too quickly, or too late, might mean it never takes off.
- Losing focus (13%)
It’s dangerous to change idea or vision too quickly, or too often, as you can lose sight of the fundamentals of the service initially created.
- Poor governance (13%)
Good delegation is an art form, on which the balance of the company may depend.
- Not being able to adapt your business model (10%)
You must be sufficiently agile to be able to adapt your business model if needed. But be careful, it’s a delicate operation!
- Lacking passion for your product (9%)
When the desire to develop a good product is overtaken by the desire to make money, danger is never very far away.
- Not being in the right place (9%)
A good service must be easily accessible in order to find the talent and the customers that will bring it to life.
- Not attracting interest from investors (8%)
A “bankable” project must be able to attract investors, i.e.: be well presented and have good prospects.
- Incorrectly identifying regulatory constraints (8%)
Whether they have been ignored, under-estimated or come as a surprise after the launch, regulatory constraints always endanger the success of the project.
- Not cultivating your networks (8%)
The survival of a business these days depends on its capacity to develop its network and use its investor contacts well.
- Psychological burnout (8%)
Be wary of burn-out affecting overworked bosses! It’s important to keep a good work-life balance.
- Refusing to make a fresh start (7%)
If all the indicators are in the red, there’s no point burying your head in the sand. You will undoubtedly need to adapt your business model so as not to lose your team and your customers.
1 Sources: CB Insight post-mortem study on the causes of failure of 101 start-ups & exaegis’ own observations on a smaller sample.