Why Do Startups Fail? An Analysis of 3,200 High-growth Startups

I read a very interesting article on TechCrunch today about why startups fail. They shared data from research that Blackbox conducted for their Startup Genome project, which is trying to uncover what makes Silicon Valley startups succeed vs. fail. You can gain access to the free full report here. I highly recommend that you take the time to read through it. Pretty fascinating data.

My biggest takeaway from all of this? Startups absolutely need great mentors. Surprisingly, hands-on help from their investors did not have a significantly positive effect on their performance. I believe that most startup founders assume that they are going to get the guidance they need to be successful once they have secured the backing of a solid VC firm. This certainly does not appear to be the case. As I look through the key findings from the report, these points of failure seem to quite avoidable if a startup had a strong, smart team of mentors that they could turn to for advice on these issues. In particular, the most common reason for startup failure was “premature scaling” along one or more key dimensions (i.e., Customer, Product, Team, Financials, and Business model). Knowing how and when to scale a startup appropriately along these dimensions is something that an experienced mentor understands (e.g., someone who has learned from his or her own scaling successes and failures).

15 Key findings from their report

  1. Founders that learn are more successful. Startups that have helpful mentors, track performance metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.
  2. Startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all. A pivot is when a startup decides to change a major part of its business.
  3. Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves. Startups can prematurely scale their team, their customer acquisition strategies or over build the product.
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Developing Your Creativity and Innovation

Creativity lightbulb

I answered an interesting question on Quora today about creativity and innovative thinking. I’ve encountered this question in its many forms several times over in my lifetime. I remember one of the earliest being when I was in high school. The principal and a few teachers formed a very small research committee that included 5…

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Shoshin Project Video Interview with Larry Cornett: Search Should Beware of Social Media

Image of Larry Cornett - Shoshin Project interview December 2010I was in NYC last week and had the pleasure of speaking with the folks from The Shoshin Project about the current trends within the Tech industry. Specifically, we talked a lot about the impact of social media and how it could potential disrupt traditional information retrieval (i.e., Web Search). I believe that social media’s popularity and technology may push aside traditional search by helping users tame the information overload beast that the “stream” has become.

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Larry Cornett Joins Primal Board of Advisors

I’m proud to announce that I have joined the board of advisors at Primal; a very interesting startup that is developing powerful semantic technology to enable smart automation of the tasks you do daily on the Web. Imagine a smart assistant that better understands how you think and what you want. Very interesting indeed. I…

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Another Facebook Privacy Breach Today

Update: Special thanks to the folks over at Facebook. I talked with a couple of people there who looked into the issue. Turns out that this case was actually not a privacy bug. Rather it most likely a case of an unintentional “reply all” and some sort of synching fluke, so that a threaded conversation…

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Apple iPhone 4 Antenna Conundrum

There have been a lot of discussions over the past couple of days about an antenna issue with the new Apple iPhone 4. Mine isn’t here yet (grumble), so I have to rely on what others have been experiencing. But, apparently, if you hold the new iPhone in such a way that your hand bridges…

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eBay Acquires RedLaser iPhone Barcode-scanner Application

eBay just announced today that they are acquiring RedLaser, an iPhone application that lets you scan barcodes on products in stores and do immediate price comparisons online. Product search on mobile devices has dramatically increased recently as a result of consumers being more price conscious and the improvements in smartphone technology. Buying RedLaser is a…

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