What mistakes lead to a startup failure

In a recent speech, I was asked what mistakes led to the failure of entrepreneurship. Standing there for a few seconds, I realized that it was a difficult question to answer. It's a question of how a start-up can succeed. If you can avoid all the mistakes that lead to failure, you will naturally succeed. This question is too big to answer clearly in such a short time.

Then I realized that it might make sense to look at it from another perspective. If you have a list that lists all the things you shouldn't do, just take the list and you get a recipe for success. In practical applications, such a list would be more valuable. It's easier to find out what you're not doing than to remember what you should be doing.

In a sense, there is only one mistake that leads to a startup failure: No one needs what you do. If what you are doing is what the user needs, then you should be able to survive and no other problems will matter. But if what you are doing does not meet the needs of the user, then you are dead, nothing will change this end. So the 18 bugs listed in this list are actually the factors that cause startups to not meet the needs of their users. Almost all of the reasons for failure can be summed up in this area.

1 Loner (single founder)

I wonder if you noticed that very few successful startups were created by one person? Some companies you might think are single founders, such as Oracle, are actually created by more than one person. This does not seem to be a coincidence.

What's wrong with a single founder? At the very least, this reflects a lack of confidence. The implied message is that the founder could not persuade any of his friends to conquer with him. It's worth pondering: Don't forget, his friend is the one who knows him best.

Even if the friends are wrong, the company may actually be very promising, but the disadvantage of the single founder is still obvious. It's too hard for a person to start a business. Even if you can do anything, you need your peers to brainstorm, avoid stupid moves, and encourage each other in the face of setbacks.

The most important point is that you may encounter an unbearable low point in your entrepreneurial process. When you have multiple founding partners, the support for each other's beliefs is like a bundle of arrows. Everyone secretly cheer themselves: "I can not let my friends disappointed." "It is one of the most powerful drivers of one. The single founders lacked that impetus.

2 Lack of geography (bad Location)

Not all places are suitable for entrepreneurship. Silicon Valley is the best place to start a business, Boston second, followed by Seattle, Austin, Denver and New York. In addition, there are few other options. Even in New York, the density of start-ups has dropped to around one-twentieth of Silicon Valley. And in places like Houston, Chicago and Detroit, the possibilities of starting a business are almost negligible.

Why is there such a big difference? In fact, other industries have similar situations. Where is the largest fashion center in America? Where is the big oil, finance and publishing Center? Whatever the answer, it is certain that the centres are far smaller than the top.

Why do some cities become the gathering ground for start-ups? This question is very interesting. I think the answer is similar to the conclusion in other industries: there are a large number of professionals. There's a high level of professionalism; people are more likely to resonate with what you're doing; You can find people you want to hire more easily; you have more opportunities to meet people in a field with you; wait, wait. God knows how these combined factors contributed to the prosperity of startups in Silicon Valley and how to make a city like Detroit a shade. The numbers, however, illustrate everything: in Silicon Valley start-ups are far more dense than the numbers in Detroit.

3 field bias (marginal Niche)

Most of the teams who applied for VCs to Y Combinator made a common mistake: deliberately choosing narrow, very obscure areas to avoid competition.

If you've seen kids play baseball, you'll find that children under a certain age are a bit afraid of the ball. Face to the ball, their instinctive reaction is to avoid. I was a fielder when I was eight years old, but I didn't get a lot of balls because every time I came in the ball, I always closed my eyes and raised my gloves to protect myself, instead of getting the ball.

A start-up, if it's all about choosing a narrow project, is the same strategy I had when I was eight years old. You know, if you can achieve something, you have to have competitors, sooner or later you have to face. So, if you don't want to compete, then the ideas you come up with are no better.

I think, this encounter big difficulties on the retreat of the action, often people in the subconscious to make. It's a big idea, but it's a decision to pursue a smaller, safer goal, because you're subconsciously rejecting big ideas. The solution to this problem is to pretend that you are planning for someone else, not for yourself. Think of a good idea for someone to start a business?

4 repeats (derivative idea)

Many of the applications we receive are emulating some existing companies. The existing company does give you some ideas, but it's definitely not the best. If you look back at successful startups, it's very rare to start out as a copycat. Where does their inspiration come from? Typically, the founder discovers some unresolved specific issues.

Our own start-up business is to write software that enables it to generate Web sites for online stores. We were alone, and a handful of websites that supported online transactions were written by the professional designers of the Internet and cost very much. We realize that once online shopping is booming, these sites must be generated by software, so we write such a software. The origins of this idea are straightforward, that's all.

The problems that affect you personally should be the best. Apple was born because Wozniak (Steve Wozniak) needed a computer, and Google (Google) was because Larry and Sergei (Sergey) could not find what they wanted on the internet, and Hotmail was because Shabir Bhatia (Sabeer Bhatia) and Smith (Jack Smith) are unable to e-mail each other at work.

So, instead of copying Facebook and doing some piecemeal work on it, you should find inspiration in other directions. And don't be influenced by existing companies to fire their cold; you should look for unresolved issues and imagine what companies can solve those problems. [2] You need to figure out what people are complaining about and expecting.

5 opinionated (obstinacy)

In some areas, the path to success requires you to identify what you want to do and stick to it, no matter how frustrated you are. Entrepreneurship is another matter. If you want to win an Olympic gold medal, then you should be a target, never give up, because your goal is very clear. However, entrepreneurship is more of a scientific study, and you should follow the laws of nature rather than the subjective.

You should avoid sticking to the original plan too much because it may be wrong. Most successful startups don't end up doing what they're trying to do, and the difference is so much that it's hard to relate them to the original company. In the process of starting a business, you should be prepared to accept any better ideas, and the hardest thing to do is to give up what you already have.

Of course, there is also a question of degree. Another idea every week is obviously not going to work. Is there any standard that can help you make a decision? One way is to measure whether the new ideas represent some kind of progress. If you can take advantage of most of what you've done, you may be in a spiraling process; If you need to start from scratch, that's not a good omen.

Fortunately, you can ask your users for advice. If you turn to a new direction, and the user is enthusiastic about it, then you are likely to bet on the treasure.

6 Encounter person slept (hiring bad programmers)

I forgot to list this in the earlier checklist because most of the founders I met were programmers. It's not a big problem for them. Even if they hire one or two of poor programmers at a time, it's not like the sky is falling. At a critical juncture, they can all be in their own hands to help the tide.

But when I went back to the 90 's when the failed e-commerce start-ups, I found out that bad programmers ruined those companies. Many companies are created by people in the business world. They think startups have a good idea and hire a bunch of programmers to implement it. This is really easy to do. People in these business areas simply can't tell the difference between a programmer's good or bad. They don't even have access to the best programmers, because no program master is willing to implement a businessman's vision.

The fact is, these people recruited some of the programmers they thought were good (at least the programmer's résumé is so boastful, what Microsoft Certified Developer, etc.), but in fact it is difficult. Then they will be puzzled to find that their company is like the old cow pull a car creaking, and competitors are the same as the Rockets. Such startups have all the drawbacks of big companies, but they don't have the advantage of big companies.

If you're not a programmer, how do you pick a good programmer? I don't think there is any good way. I was going to say, you can find a program master to help you do it. But the question is, how did you find the original program master?

7 Development platform selected improperly (choosing the wrong Platform)

The problem with the above is that the development platform is poorly chosen (usually the bad programmer makes the mistake). I think a lot of startups have been bogged down in the bubble era by building server-based applications on Windows platforms. Hotmail is still running on FreeBSD (translator: a Unix platform) after being acquired by Microsoft for several years, presumably because Windows is not up to its load. If Hotmail's founders chose Windows, they would probably have failed long ago.

PayPal just escaped a robbery. After merging with a dotcom (translator: This should mean ebay, do not know what the author and ebay have a holiday?) :)), the new CEO wants to go to Windows although PayPal's co-founder Max Levinchen Max Levchin shows him that their software systems have only 1% of the ability to handle windows on Unix. Luckily, eventually they changed the CEO, not the operating system platform.

Platform is a very vague word. It can refer to the operating system, the programming language, or the frame structure above the programming language. Its implied meaning includes both support and restriction, just like the foundation of a house.

You have to choose the platform with caution and caution. Some platforms, for laymen, seem to be good, responsible choices, like Windows in the 90 's; Once you choose them, you're digging your own grave. The Java applets is probably the most typical example. It was once thought to be a new way of releasing applications. As a result, of the 100 startups that believe it, 100 have been destroyed.

How to choose the right platform? The usual approach is to recruit good programmers to choose from. If you're not a programmer yourself, there's a tip: Go to the top computer departments and see what they're using in their research projects.

8 release retardation (slowness in launching)

All companies, big or small, have a difficult time before they can complete the software. In a sense, this is an intrinsic trait; software completion is always around 85%. You need a lot of willpower to drive the software to completion and release it to the user. [3]

Startups always use a variety of excuses to justify postponing the release. These excuses are similar to the reasons people find themselves late in their daily lives: there are always some things to do before that. Maybe. But if your software is complete, press a button to release it, will you wait?

One of the purposes of releasing as soon as possible is to force you to complete the work that should be done. A software, as long as it has not been released, is not really done. Regardless of how well you think the software has been perfected, there is always a whole bunch of things to do in the immediate release, and that is a commonplace. Another goal of publishing is that you can really understand what to do only through user feedback.

There are some issues associated with release delays: The pace of work is too slow, there is no real understanding of the problem, fear of dealing with users, fear of other people's comments, too much distraction, too perfect, and so on. To solve these problems, just push yourself to release something as soon as possible.

9 release prematurely (launching Too Early)

It's a lot less premature to post than it was, but it's not. The danger of premature release is likely to ruin your reputation. Early adopters may not come back if they find something that is not satisfactory after they try out what you've released.

If you want to release the same product, what is the minimum requirement? We recommend that startups take a serious look at what they want to do and determine their core content, and that these core elements can be used as a basis and gradually become a complete project. Once these are identified, they should be done as quickly as possible.

I and many other programmers follow this approach to write software. Think about the overall goal, and then write some useful minimal modules. These modules have to be written sooner or later, so don't worry about doing nothing. In most cases you will find that implementing these modules can be both spiritual and help you see the rest of the section more clearly.

In fact, the early adopters you need to impress are very forgiving. They don't expect a new product to be omnipotent, but it should be a little useful.

10 No clear target user (having no specific user in Mind)

If you don't know the user, you can't make what they like. As I mentioned earlier, most successful startups start with solving problems with founders. There is a rule in this: The wealth you create is proportional to your understanding of the problem, and what you know best is your own problem. [4]

The converse of this theory is that if you try to solve a problem that you don't understand, it's tantamount to putting a noose around your neck.

But there are still a lot of founders who like to assume that some users are willing to use their products, and they are not very clear about who these users will be. Do the founders need these products? No, they are not the target market. Then who would it be? Young？ Who are interested in local activities? Or is it a user in the business world? What kind of business area? Station？ Film studios? Or a military buyer?

You can certainly create products for different types of users. That's what we've done. The problem is that you have to realize that you have stepped into a dangerous zone. It's like you're flying with a meter: your own intuition won't help. So you have to be careful in every step of your operation and always check your meter.

In this case, the user is your instrument. You must follow the principle of "from the practice". Any subjective guesses are not allowed; You must contact the user and examine their reactions. So, when you design a product for someone other than yourself, you have to convince certain users to use your product; If you can't do that, then failure is inevitable.

11 Raise too little money (raising Too Little)

Most successful startups will accept investment at some stage. This is like having multiple founders, statistically speaking, as a measure of security. So how much investment should you accept?

Start-up money is measured in time. Every start-up that has not yet been profitable (almost all startups are unlikely to make a profit at first) will have a period of time before the money is spent. This time is sometimes dubbed the "runway" (runway). This is a good metaphor, it reminds you, when you spend the money, either take off or crash.

Too little money means you don't have enough runway to take off. Of course, the concept of Take-off also depends on the situation. Usually you need a higher level: from just having an idea and a prototype being realized, to having a prototype, being released, and to having released a product that is in a phenomenal growth period. It also depends on what investors think, after all, they are the ones you have to convince before you can make a profit.

If you accept money from an investor, the amount should at least be able to support you to the next stage. [5] Fortunately, you have control over what the next stage is and how much you need to spend. We recommend that startups set the two targets lower at the beginning: basically it doesn't cost much, and the initial goal is to build a solid prototype. This will give you maximum flexibility.

12 spending excesses (spending Too much)

Sometimes it's hard to tell the difference between spending too much and raising money too little. If you don't have enough money, you can say that you are spending too much, or that you are raising too little money. The only way to differentiate these two is to compare them to other startups. If you raise 5 million of the money but still not enough, then the reason is likely to be excessive spending.

Now the buns are much less expensive than they used to be. Entrepreneurs seem to have learned the lesson; So in writing this article, I didn't find that a few startups were burning money. None of the companies we invest in. (not only because our investments are small, but also because many companies are making multiple rounds of fundraising.) ）

The most classic way to burn money is to hire a large number of people. Doing so can be doubly damaging: it increases costs and slows down. So the faster you spend your money, the longer you have to find a way to keep it going. Many software gurus understand this, and Frede Brooks (Fred Brooks) gives a detailed explanation in his "Man Moon Myth" (The Mythical Man-Month).

For hiring, we have three basic recommendations: (a) exemption from the rule; (b) Replacing wages with shares is not just about saving money, but more importantly, you want your people to be willing to link their interests to the interests of the company; (c) Those who recruit should be limited to two categories, or write code, or go out and pull customers, Because at the beginning, you just have to do these two things.

13 Raise too much funds (raising Too)

Raising too little money is obviously not, so too much money is also a problem?

Yes, not at all. The key is not in the money itself, but in the ensuing problems. A VC once said, "Once you get millions of of the money from me, then the timer starts." "VCs invest in you, not letting you put money in a bank and then soak up the bowl all day long, and they want the money to work." [6] At the very least, you have to have a decent office as well as some staff. And that will change your working atmosphere and not necessarily in a positive direction. Now, most of your horses are your employees, not the founders of the partnership. They can't be as committed as you are, they need someone to tell them what to do, and, worse, someone will start playing with the stuff in the office.

When you raise a lot of money, your company will move to the bustling area and start have.

And more dangerously, once you've got a lot of money, you're going to get a taste of the ship's catastrophe. Suppose your initial plan was to sell a product to the company. After getting the money from VCs, you hired some salespeople to do it. Then you find that you should put your energy into the consumer rather than the commercial companies. There will be a fundamentally different way of selling. What do you do then? In practice, you may not even know it. The more people you recruit, the more likely you are to move along in the direction you're in.

Another drawback to a big investment is that it takes too long. The money you can raise is in direct proportion to the time you spend. [7] When investment reaches millions, investors become very cautious. VCs never explicitly say yes or no; they'll talk to you endlessly. So raising a sizeable sum of money from VCs is a time-consuming thing that may take longer than the amount of time you need to start a business. When your competitors are racing to develop their products, I don't think you want to spend your time with investors.

We advise those who seek VCs to accept it once they meet the right deal. If you can get a reasonably reasonable amount of money from a reputable fund and have no unreasonable rules, then make a deal and invest in building your company. [8] What if you could get 30% more money from somewhere else? Entrepreneurship is a game that either earns a full bowl or loses the shirt. It is a waste of time to wander among investors for a little bit of profit.

14 subject to investors (upgraded Investor Management)

As the founder of the company, you should master the company's investors. You should not ignore them because they may provide insightful advice. But you must not hand over the company to them; If investors have enough insight into the companies that run their investments, why don't they start a company on their own?

The consequences of ignoring investors to annoy them are much lighter than the consequences of surrendering to them. We have mistakenly overlooked investors when we started our business. As a result, the argument with the investors involved a lot of our energy. But it's better than surrendering so much that the company may be over. A founder who knows what he's doing, spends half his energy on the product and spends all his energy on investors who don't know anything.

It usually depends on how much money you take from them. If you raise a sizeable amount of money, investors also get a sizable amount of control. If they make up the majority of the board, then they are your nominal bosses. The more common scenario is that the founders and investors are equally weighted, and the decisive vote comes from outside neutral directors. At this point, investors only need to convince the neutral directors to gain control of the company.

If everything goes well, it doesn't matter. As long as your progress looks swift, most investors will not meddle in your affairs. The problem is that it is impossible for a start-up to expect smooth sailing. Even the most successful companies have been found to be in great trouble by investors. One of the most famous examples is Apple. Its board has made a fatal mistake: Steve Steve Jobs. (Translator: In 1985, because of the power struggle, Steve was driven out of the Apple Computer; In 1996, as his NeXT company was bought by Apple, he returned to Apple and took over the reins in 1997.) See Wikipedia entry. Even Google has had an unpleasant experience with investors in the early days.

15 sacrificing users for (non-existent) profits (sacrificing users to (supposed) viewable)

I said in the beginning, if you do something that users need, then there should be no problem. You may have noticed that I did not mention anything about the right business model. This is not to say that making money doesn't matter. I do not recommend that entrepreneurs engage in companies that are less willing to make money, and then hope to sell the company before they fail. We tell entrepreneurs not to worry about the business model because the first reason is that it's a lot harder to get what people need.

I don't know why it is so difficult. It seems to be a straightforward thing. But only a handful of startups did. From here you can see how difficult this thing is.

It's because it's harder than making money to make what people need, so you should think about the business model later, just like you left some trivial and troublesome features to the second edition. In the first edition, address the core issues. For startups, the core question is how to create wealth (= How much people need your product-the number of your products), not how to turn wealth into money.

The ones who can win are the companies with the highest customer focus. Google, for example, first developed a search engine before considering how to make money. There are always some founders of startups who think it is irresponsible not to think about business models from the start. These founders are often bewitched by rigid-minded investors.

If it is irresponsible to say that the business model is not considered, it is 10 times times less irresponsible than the product itself.

16 aloof (not wanting to get Your hands Dirty)

Almost all programmers are more willing to spend their time writing code and looking for someone else to deal with money-related sordid business. It's not laziness. Larry and Sergey in the beginning. After developing new search algorithms, their first attempt was to find a company to buy it.

Start a company? Forget it. Most of the program gurus are more content with just one idea. But, as Larry and Sergey discovered, there is no market for ideas. No one is going to believe an idea unless you use it in your product to get users. So that people will give you more attention.

Maybe that will change, but I doubt it. There is nothing more persuasive to the acquirer than the user. This is not just because the risk is reduced; you know, the acquirers are people, and it's hard for them to hit a bunch of young people with millions of dollars, just to be smart. When ideas are implemented by a company and have a lot of users, investors can comfort themselves that they are buying the user, not the unseen ingenuity. It's easier for them to accept. [9]

If you want to attract users, you may have to leave your computer and go outside to find some users. This is certainly not a pleasant job, but if you can do it, the chances of success are greatly increased. In the summer of 2005, the vast majority of founders in the first batch of startups we funded were buried in writing their apps. Only one founder spent half his time talking to the executives of mobile phone companies to finalize deals. Can you think of something more painful for a programmer? [10] But his pay was rewarded: the start-up seemed the most successful in the group, and they got a big order.

If you want to start a company, you have to face the fact that you can't just sit there and write a program. At least one of you needs to spend a certain amount of time on business.

17 Internal battles (fights inclusive founders)

The battle between the founders was unexpectedly widespread. About 20% of the startups we sponsor have a founder exit. This frequent occurrence makes us more inclined to the equity grant (vesting). Although it is not necessary, we suggest that the founders give the equity, so that there is no confusion in the middle of the exit.

The departure of a founder does not destroy the company. Many successful startups have similar situations. [11] Luckily, leaving is usually the least invested.

If there are three founders, one of them is not very positive to quit, no big deal. If there are two founders, one of them is gone, or the one who leaves has the key technology, then there may be trouble. Even so, it is not the sky falling down. The Blogger once left only one person, but finally he perked up.

Most quarrels can be avoided if founders are more cautious about choosing their entrepreneurial partners. Most quarrels do not start with things, but from people. In other words, it will happen sooner or later. And most of the founders who left with an angry quarrel might have been less confident from the start, but were disguised. Don't hide your doubts. It is much easier to solve the problem before the company is established. So don't pull him out because you're afraid to alienate your roommate, or start a business together because someone has some kind of skill, whether you like him or not. A startup, the most important factor is people, so don't have anything on it.

18 not able to devote full-time (A half-hearted Effort)

The failure of startups you've heard of is a very special example. They are, in fact, the champions of the losers. The most common losers are not because they have made these very special mistakes, but because they have not done anything that we have never heard of. They are often two or three people, playing with one another after work, never making any real progress and gradually giving up.

Statistically speaking, if you want to avoid failure, a very important thing is to quit your daily work. The founders of the vast majority of failed start-ups are amateurs, and the founders of the successful start-ups are all in the same business. If the failure of a start-up is likened to a disease, CDC will post a notice warning everyone to quit their daily work.

Does that mean you have to quit your routine? Not necessarily. I have a wild guess here. I think the founders who haven't quit their jobs mostly lack the determination they need to start a company; They are afraid to invest more time because they know it is not a good investment. [12]

I also suspect that there are quite a few people who can do this step and all of the time, and it is a pity that they did not. I don't know how many people there are, but if the winners/the fence/The hopeless are to be distributed, those who quit the job can be successful, more than those who are successful in the reality of the order of magnitude. [13]

If this is true, then most likely successful start-ups fail because their founders cannot devote themselves wholeheartedly to them. This is consistent with the conclusion I have drawn. The vast majority of startups fail because they can't do what users need, and the reason they can't do it is because they're not working hard enough.

In other words, entrepreneurship is like doing other things. The biggest mistake you may make is not enough effort. If there's a secret to success, don't deny it.

Comments

[1] The list does not list all the reasons, only the factors that you can control. There are things you can't control, such as lack of ability or bad luck.

[2] The funny thing is that a viable idea from Facebook is for Facebook, which is not a student at school.

[3] Steve Jobs tried to inspire people with real artists. This is a very beautiful sentence, but it does not mean the truth. Many famous works in art have not been completed. This may be true for areas with definite deadlines, such as construction and production. But even in these areas, people can always drag and drop.

[4] There may be another factor: founders of startups are generally at the forefront of technology, and the problems they face are often of special value.

[5] You raise more money than you think you need, about 50% to 100%. Because the time spent writing software is often much longer than you estimate.

[6] People sometimes call us a style cast, and I'm going to make it clear that we're not a VC. The wind throws a lot of money, and it is spent by others, and we spend our own money, small amount, more like angel investment.

[7] Certainly not linear, otherwise you will never raise 5 million dollars. But in practice, you feel like there's really no end to it.

Even if you take a lookout for an impossible investment, you may find it too time-consuming for the general situation. The danger of pursuing a big investment is not just that it takes a long time, but, more seriously, you may spend time without a penny.

[8] Some VCs deliberately depress your value to test whether you have the guts to ask for more. It's a tacky game, but there are some VCs playing. If you're dealing with a VC, you should bargain on the valuation.

[9] If YouTube's founders ran to Google in 2005, they said, "Your video design is too bad." Give us 10 million, and we'll point out all your mistakes. "Then they will surely be ridiculed. But 18 months later, in order to buy this lesson, Google paid 1.6 billion. Perhaps partly because Google can console itself: We are buying a new thing, a community, or some sort of fuzzy concept.

I'm not picky about Google. They are already ahead of their competitors. Those competitors may have missed the video of the boat.

[10] Indeed there is: dealing with the government. But the phone company will be happy.

[11] This is a lot more than people see because companies never advertise the skeleton. Did you know that Apple originally had three founders?

[12] I do not despise these people. I myself lacked such decisiveness. After Viaweb, I was close to starting a company two times, but every time I backed out. Because I realized that without a survival crisis, I could hardly bear the sense of urgency of entrepreneurship.

[13] How do you know what kind of person you belong to? Those who should quit their jobs? or more Pingping? I must say that it is difficult for you to judge by yourself. You must seek outside advice. We think of ourselves as investors, but from another perspective, Y Combinator is a service that advises people to quit or not to quit their jobs. We may make mistakes and we often make them, but at least we are betting on our own conclusions.