The 13 Top Reasons Why Startups Fail

Source | : By Emma McGowan

Fail fast. Fail forward. Those are just two of the mantras you’ll see hanging in startup offices and incubators across the globe. In the startup world, a failure is considered a learning opportunity, at the least; a feather in the cap of the Founder, at best. We fetishize failure. We normalize it.

But as much as we talk a good game about failure, the reality is that failing sucks. Just as no one goes into their wedding day planning for divorce, no one starts a company thinking, “Yeah, this one will just be my starter. I’ll get it right next time.” No wants to fail, and yet the majority of startups do fail.

According to an examination of startup businesses (by which they mean new companies in general) in the United States conducted by Statistic Brain, almost all new companies fail: 50 percent after five years and 70 percent after 10 years. Their data found that 46 percent of all companies in the US fail due to “incompetence.” That category includes everything from “emotional pricing” to “no experience in record-keeping” to “nonpayment of taxes.” The next 30 percent failed due to “unbalanced experience or lack of managerial experience”, followed by 11 percent failing due to “lack of experiences in line of goods or services.”

But while the failure rate for new companies in general is high, they’re nowhere near the failure rates of startups. A commonly cited number is “90 percent of all startups fail,” but one study by Harvard Business School senior lecturer Shikhar Ghosh found that the number might be closer to 75 percent. The “real” number is probably somewhere in between the two.

Regardless, it’s very high. So why is that?


While we can all share anecdotes about why startups we know failed, let’s take a look at the one actual study examining why startups fail. CB Insights analyzed 101 startup “postmortems” — you know, those Medium posts Founders do when their company goes under — to determine what the most common causes of startup failure were.

According to their findings, here are the top 13 reasons why startups fail, along with some stories from the community that we hope will help other Founders who are trying to make it into that 20 (or so) percent that succeed.

Read On….

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