We don’t want to think about it, but many startups don’t make it past the first 2 years.
In a well-known research by CB Insights among 101 failed startups of Silicon Valley in 2014, startups coughed up multiple reasons for their painful failures. Shockingly, the main reasons were not the quality of the product or technical difficulty during development.
Confessing failure
By far the biggest reason for failure was a lack of market demand. In 42% of the cases, this was identified as a reason.
Imagine that for a second; you’ve spent years developing a product, convinced friends and strangers to help you build it, and raised the initial capital to get it off the ground only to find out no one wants to buy it. Other reasons for failure include running out of cash (29%) and not having the right team (23%).
This doesn’t even take into account the slim chances of having a product to sell in the first place. At Startup Thailand 2017, Mr. Yossi Shavit of Yozma Consulting illustrated the survival rates among Israeli startups.
According to data from Harvard Business School, 2% of Israeli startups gained seed capital. Only 27% of them also secured a second round or Series A funding, and 35% of these also get a third round of funding.
All in all, only 0.19% received the funding they needed to reach full operation and solid revenue.
Help, what to do?
So far the doom thinking. What can you actually do to prevent ending up on the wrong end of these statistics?
According to Mr Shavit who advises startups, multinationals and investors since 2005, there are measures founders can take to increase the chances of success (and accompanying honor, glory, money of course).
According to him, investors look for a startup with the potential to scale to a global market. Just focussing on your home country is not enough, especially if the number of citizens is limited.
Next, lower the uncertainty with extensive market research and talk to potential customers. Having a solid team with the needed skills to develop and sell the product is essential. Just like having a vision and specific goals to direct your actions.
An investor wants a team that can move with change and will pivot when needed. Secure some early investment. And finally, know your limitations.
Isolation is not your friend
The no. 1 advice after listening to Mr Shavit’s keynote speech, is to find out if people want your product, how much they are willing to pay for it and which features are absolutely necessary.
Simply put, talk to potential customers before you head on this long journey with slim chances of getting funding. Prevent getting through all of that and failing anyway, because you didn’t stick your head out of your cave.
Or as Mr Shavit put it:
“You think it’s good. Your mother tells you ‘It’s great! I will buy it!’, but the market says 'Well, no... I don’t really need it.' You’re supposed to figure out if the problem you found really is a big problem.”
Watch the entire speech of Mr Shavit at Startup Thailand 2017 on 7 July 2017 here.
If you enjoyed this article, please upvote and follow me!
nice post
upvoted & followed you
This post received a 2.6% upvote from @randowhale thanks to @hrsagar! For more information, click here!
Nice post. Followed you. Please follow me.
Done and BIG thanks @withsmn!
I started a new business not that long ago and I appreciate this kind of content. Following. Please follow back.
Thanks @forgetmenot and follow!
Failure is good for us as it help us to learn and get better, and if we don't it will keep teaching us those hard lessons until we do learn :)
Sooo true @wilbertphysique
I learn from my failure, there's no wrong failure, it's just an other step in your success journey path, the wrong it's to stop trying to avoid failure, never play safe get out from your comfort zone & try till you achieve your goals.
Nice post @anrikevisser.... Thanks for share with us.... @supriya1993
Thank you so much, great info :)
Well done!