• Max Bonpain

Here is why startups fail, and what you can do about it

We all know the stats about the chances of our startup surviving more than 3 years, let alone hitting it big and joining the unicorn club: terrible.

And we think we know the reasons why: lack of cash flow and we can’t fund our runway. Bad luck? Bad timing? Maybe. Poor preparation? Most likely: I’ve heard a lot of reasons why it didn’t work, and -most of the time- it could have been prevented.

I work with a lot of startups, and I’m always amazed by how little the founder knows about entrepreneuring (aka entrepreneurship, but I prefer a more active version of the word) and the world of startups. They have no idea what they got themselves into and seem to be discovering the real challenge facing them almost inadvertently — scary! Most of them try to learn as they go, believing if they have a great product and enough resilience, they’ll make it anyway. Sure, that’s possible — but that’s why the stats are what they are: terrible!

Usually, they don’t know about sales and marketing, they don’t really know how to talk to angels and VCs, and so on. They realise a bit too late that they didn’t provide enough data (proof of concept) on the go-to-market because they were busy working on the MVP way longer than needed. How do you build a budget? How do you even know how to allocate your resources beyond hiring a couple of developers and sales people? How do you compute a cost per acquisition or a customer lifetime value? Any idea how VCs estimate the valuation of your business and how to manage the various rounds (hopefully!) of investment? In most cases, you have only one chance, so you’d rather be prepared.

As an investor, I also know the stats for founders who have already built one or two startups before are much higher and that many first-time founders would greatly benefit from preparation about entrepreneuring.

So, if you are a first-time founder, please think about about this:

  • most important of all, you need co-founders! There are many reasons why, but especially the increased learning you get. If you can join forces with someone who’s already done it, even better.

  • get mentors and advisors on board early on. You want to avoid wasting time and money going too far down the wrong path or simply not knowing what the key milestones are beyond your MVP.

  • do a “crash course”: there are lots of resources online, including Medium of course, as well as books and classes that can explain all about the process of entrepreneuring.

  • join an incubator / accelerator… and make the most of it! I mentor startups in 2 accelerators: few of them actively network and share experience with other founders. Funny enough, the few who do are also usually the ones raising funds and getting customers.

Let’s be clear: you can build a great business without any of this, but why on earth wouldn’t you put all chances on your side? Maybe you think you already know enough? Well, I’ve been in this industry long enough, and I am still learning every day.