Main Reasons why Startups Fail

Since 2019, we at GreenTech Rangers have started hosting the national stage of the world’s largest green business ideas competition called ClimateLaunchpad, which is supported globally by EIT Climate-KIC. This year, we are running our second edition of ClimateLaunchpad Moldova, where we help seven green business ideas to grow into financially and environmentally sustainable startups with scalability potential. The ideas being developed in the 2020 edition are quite diverse and range from “intelligent” stackable plant pots for growing vegetables indoors to cost-efficient, accessible, and low-power wind turbines for supplying rural factories and farms with additional renewable energy.

While participating in ClimateLaunchpad Moldova, founders of these business ideas go through a series of exciting learning events, which this year take place entirely online (for obvious reasons). The participants have already completed a digital Boot Camp in June and are now benefiting from a series of follow-up training sessions and individual online meetings with our experienced coaches and mentors.

The ClimateLaunchpad Moldova Boot Camp was packed with curious insights and interesting learning points that are valuable for every beginner entrepreneur committed to make his/her business idea a reality. Surely, the way towards business success is a very challenging one and is full of various obstacles. In fact, the cruel statistic is that only about one out of ten startups succeed, while the rest enrich the ‘graveyard’ of failed entrepreneurial ideas. Why? Well, that was exactly one of the curious insights of the Boot Camp.

So, what do you think are the top three reasons why startups fail?

This was the question our international trainer, Israel Griol Barres, has asked the participating startup teams of the Boot Camp. Afterwards, the participants were offered to guess the right answer via a Kahoot game.

As it turned out, the top three reasons of failure of entrepreneurial ‘dreams’ are

  1. No market need and no customer for a business idea
  2. Startup team ran out of cash
  3. Not the right team for implementing the idea / developing the startup

Surprisingly, the unsuitable and/or incapable team stands only on the third place in this ‘list of doom’. The main ‘startup-killer’ is the lack of market and customers on it, who would buy your product or service. Indeed, even with the stellar team and the most beautiful product / service, the startup not being able to find and solve a customer’s problem is destined to fall into oblivion eventually.

Running out of cash to pay for the team, product / service development, marketing, and basic administrative costs is another common reason for startup ‘fatality’. Truly, if a startup team cannot bootstrap and/or fundraise sufficient financial resources until the break-even point, then that startup is likely to ran out of ‘air’ and to ‘suffocate’.

Last among these top three reasons, the failure to build up a suitable and capable team, is self-explanatory. While you may validate your business idea and develop a prototype of your offering or even a Minimum Viable Product (MVP) alone, to grow your startup and to deliver its product / service to your customers you will need a team. And this team should have all the key capabilities that your particular startup requires for growth and success. Without such a core team and its capabilities, your startup may have the ‘brains’, but will lack ‘muscles’ to maintain its stance and movement forward and will eventually collapse.

The rest of possible reasons for startup fails, such as competition, user un-friendly product / service, poor marketing, technical issues, legal challenges, etc. are much less significant in their negative effects than the top three ones described above. These insights came from the research Analysis of 101 Startup Post-mortems conducted by CB Insights.

Top 20 Reasons Startups Fail from Analysis of 101 Startup Post-mortems conducted by CB Insights.

Surely, we did not end our digital Boot Camp on these depressing insights. Together with our trainer Israel, the participants also learnt how to minimize the risks of their ideas and startups becoming victims to the reasons stated here. Particularly, in suggesting possible solutions for early-stage startup teams, Israel focused on the top reason related to the lack of market and customers.

How to overcome this ‘startup-killer’ and to succeed in finding the market and the customer for your business idea is the topic of our next article. Stay tuned!

GreenTech Rangers and Partners

GreenTech Rangers and ClimateLaunchpad Moldova are organized by MEGA and Generator Hub and supported by the GEF Small Grants Programme implemented by the Global Environment Facility (GEF) in cooperation with the United Nations Development Programme (UNDP).

Published by GreenTech Rangers

GreenTech Rangers is a startup pre-acceleration programme designed to improve social entrepreneurial ecosystem in Moldova and beyond. The programme integrates various social startup initiatives within Eastern Europe to create a valuable learning and development journey for young talents and prospective entrepreneurs.

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