
Startup mistakes: Lessons from failed startups - mitchbob
https://www.failory.com/blog/startup-mistakes
======
ttul
Are these really "mistakes" or are they just the random process of value
discovery, which naturally involves a lot of failures. Finding product-market
fit is not something you can engineer with perfect foresight. You raise money,
you build something, and then you have a limited time to see whether your
hypothesis about the market was correct. Often, if not most of the time, you
fail to get the fit you need in order to succeed.

There are definitely execution failures, but in my experience spanning 20
years, I have seen far more failures that are really just failed experiments
rather than execution failures. A half-decent team can get product-market fit;
once you're there, attracting the people who won't fuck up the next phase is
relatively easy. If you don't have product-market fit, no amount of genius
will save your company.

~~~
codingdave
> You raise money, you build something, and then you have a limited time to
> see whether your hypothesis about the market was correct.

Or, you get to know an industry, see a need, design a solution, bounce your
ideas off people in the industry, do some mock-ups to get some initial
acceptance of the idea, ask if they'd pay for it, and if/when all that comes
together, then start to build. If you cannot build it with your available
resources, maybe look for some funding.

~~~
nostrademons
Works well if your startup is filling in a niche within an existing industry.
Does not work well if your startup is creating a new industry. There is a
reason why the failure rate for the latter situation is abysmal. But that is
also the reason why the returns are so large and sought-after for that
situation.

~~~
jellyksong
Why doesn't this work for new industries?

~~~
nostrademons
It's hard to "get to know an industry, see a need, design a solution, bounce
your ideas off people in the industry" if the industry doesn't exist yet.

------
12xo
"By far the most common reason for shutdown was lack of product-market-fit
which constituted more than half of the marketing mistakes"

During the dotcom boom of the late 90's the issues in the Valley were often
attributed to a lack of engineering talent. However, after the bust many
founders and execs realized that their failures were not due to a lack of
product and engineering talent, but that there were too many engineers putting
out products that the market did not want or need.

This study seems to validate that idea. Without a clear understanding of the
market and how to reach your potential customers, your idea is likely not
worth the time. Spend more time on understanding the market, and how to reach
it, and you will have a much better chance at success.

------
polote
I really hate those kind of content. Would you listen to someone who built a
wall which collapsed ? nope

But you will tell me, if I can prevent the mistakes other made I will go
further than them. Well I'm not so sure, for any mistake that someone thought
they made there will be another person who identify this mistake as something
which made them succeed.

These kind of articles are just porn for people who are not putting enough
hours in working toward their ideas. (And top x things that made us successful
is as stupid)

~~~
doonesbury
Sure the first 65% is work hard. But guess what? The last 35% is a much
different ask that just does not succumb to that same hammer.

As the immediate parent implies, wall building is not all or nothing. Even in
statistically controlled manufacturing processes there is std deviation. Not
learning from mistakes is itself a kind of arrogance. In fact the preferred
model is neither arrogant rejection or passive adoption. To use an a sort of
Bhuddist analogy, we listen carefully and extract the gold from the
gold+useless ore in the wisdom we hear and refashion it into our own art. This
requires decent teachers (suppliers of know how) but also decent students who
are interested in real learning not passive regurgitation. Making our own art
is demonstration of mastery and of appropriate internalization. It avoids the
silly extremes of man as an island and man as an empty if pious vessel to be
filled with rhetoric that we can grandstand on.

Those of us in profitable and large organizations will see the same truths
about market acceptance and customer approval in a modified way: often our
organizations are too sterile and inward looking. Losing the customer starts
slow but in that last quarter or two accelerates fast often with a profound
finality to it.

------
pontus
These retrospective analyses, while intriguing to read, should be taken as
more descriptive than prescriptive.

When you talk to someone who actually succeeded at something, they'll talk
about platitudes like working hard, product market fit, iterating, listening
to customers, raising a lot of money or not raising too much money, and so on.
Many people go so far as to try to emulate the behaviors of their "hero"
(Jobs, Gates, Page/Brin, Zuck, ...), but that's a fools errand.

In a similar way, these types of postmortems should not be taken as
prescriptive. They too are full of platitudes.

~~~
svachalek
I have worked for some companies that were total failures and some that were
global successes. Having been through the failures first, I was excited to see
how the magic worked at a massively successful company, but to be honest the
differences are more subtle than anyone would believe. The big successes were
happy to do things that had been disastrous at other companies in my
experience, and did not pay much attention to the things that the popular
press considered the secrets of their success.

As disappointing as it is to think this way, it’s much like explaining the
weather or the stock market. I think people need a story, but both inside and
outside the company we are just guessing why a company fails or succeeds.

~~~
heymijo
Andy Rachleff, known for his articulation of product/market fit, says a
company with a lock on product/market fit can do almost everything else wrong
and still succeed.

Google firing all of its managers early on in its existence is a great example
of this.

~~~
physicles
It’s like Scott G says, better to be a mediocre company in a great market,
than a superbly-managed company in a bad market.

------
awillen
Good read with some really interesting information, but I don't know that I
agree with the way it implies that there's a single, defining reason for
failure. All of these things are intertwined - you can't get raise money if
you don't have product market fit, and you can't bootstrap things if you
aren't bringing in money. Team problems are tied into everything happening in
the company. Tech problems are very much related to product market fit.

Like I said - good information, but I guess it's really the pie chart that
made me feel like they were oversimplifying things.

~~~
heavenlyblue
Yeah, it’s sampling from a distribution where every company has problems in
every one of those spheres they are mentioning, except only one of these
issues will be the last one to finally finish the startup.

So it’s more about sampling from what kind of issues are more prevalent in a
startup rather than what kind of mistakes they will be making.

------
goatherders
My experience consulting for many startups is that what is called "Value add"
is a real problem at more than 2 or 3% of startups. The momentum of the status
quo is really strong and only gets stronger the larger your target company.
For example, getting a 5 person company with 4 engineers to try your new Dev
tool is an order of magnitude easier than a company 10x that size which is an
order of magnitude easier than a company 2x THAT size.

------
Ace__
I remember digging into the source material used in this article, and
contacting the founder, not Nico, but the other gentleman, can't remember his
name, an amicable friendly chap. Anyway, I said to him, that a lot of the
founders, although I respect their transparency and willingness to talk about
unfortunately failing, they appear blinkered to the reasons for their failure.
I won't mention the founders reply.

Looking at PMF in terms of:

1\. The definition of PMF

2\. How PMF is drummed into founders

3\. The proposed criteria to evaluate PMF

4\. The actual things to measure within the criteria

I won't pull a number out of my backside to state to what degree PMF wasn't
the issue, but I will say PMF was not the problem in some of the startups
mentioned in the source material. In some cases PMF was not something they
should have even been looking for at the stage they were at.

Another reason that cropped up quite a few times. Bad Marketing. Putting
growth over retention, automation and efficiency over learning and personally
figuring out how to sell in person isn't bad marketing to me. That's a bad
decision.

~~~
mattmanser
Really confused by the last paragraph, what's a bad decision? Are you saying

1\. focus on growth, automation and selling in person

Or

2\. focus on retention, learning, and automating sales

Both of which seem inconsistent?

~~~
Ace__
Hello Matt.

I am saying, and I will elaborate:

1\. Focusing on growth instead of retention in the early stages and certainly
before PMF or at least strong indications of PMF, is a bad decision.

2\. Focusing on automation and attempts at operational efficiencies when it
comes to marketing and sales, again before PMF or at least strong indications
of PMF is a bad decision.

When it comes to growth, automation and attempts at operational efficiencies,
you do that when there are strong signals. You don't cut out selling in
person, till you have an acceptable closing rate. Even then, I would still
recommend frequent selling in person to learn more until there are diminishing
returns.

Instead, you'll find an inordinate number of founders attempting to attain
double-digit growth while there is triple digit churn. Automation of certain
things like scraping lead lists, when the lists are nothing more than dump
lists.

Hacking things out, when what they should learn is discarded because the
process towards the end-goal cuts out what they need to learn, take on-board
and become intrinsic.

Throwing up websites that are clones of well established competitors.
Parroting without any deep understanding of why those things are on the site,
of why those things need to be said. Oblivious to why they themselves are not
in a position to say those things.

I would really like to say more on this. I would call it a pet-peeve, but I
got a zoo full of them. If you want to carry on the discussion in private,
happy to do so, but for now, I got work to do.

Cheers, Ace.

------
RobinUS2
Where should the primary responsibility for product market fit lie within a
startup? E.g. product owner, CTO, CEO, .. ?

~~~
nostrademons
Founders. If you're using CxO titles before you have product market fit you're
doing something wrong.

~~~
12xo
This. So many founders are enamored with their titles and their ideas more
than actually building a real company. IMHO its the most obvious way to spot a
future failure along with the amount of fluff PR and "thought leading"
blogging...

------
nicocerdeira
Hey HN. Founder of Failory here. Thanks so much for the positive &
constructive feedback on the post.

We aim to keep publishing more of these researches in order to make it
possible to learn from other startups' failures.

If you have any comments or feedback, you can drop me an email at
nico[at]failory.com.

~~~
gravypod
Do you have a breakdown of "Common Reasons For Startup Failure" by total
funding amount bracket? Is there a trend?

~~~
nicocerdeira
We didn't find any significant correlation between funding and cause of
failure. I guess, however, that this is because our data set was quite
limited.

------
samspenc
This was a surprisingly good read and data-driven.

I found it surprising that the top reason for failure was product-market fit
followed by team. I would have thought finance (#3) and tech (#4) would rank
higher.

~~~
vishnugupta
Amazon is littered with awesome tech that took 2-3 years to build and launch
but failed because there was no market for it. I worked on one such product, a
micro payments web service.

It took me a while to realize that that’s just how Amazon operates. Carry out
experiments all the time, most fail, but the ones who click take off
spectacularly. As Bezos says, don’t take Hail Mary bet. Take smaller bets all
the time.

~~~
hef19898
The thing that just continues to strike me since I left Amazon is how many
start-up ideas are buried within that company. Coming from logistics, there is
basically no internal tool or process that couldn't be turned into a start-up.
Quite funny actually.

------
api
I think tech problems are under-represented.

The thing about tech problems is that they don't show up as tech problems
unless they are _really_ bad. They usually show up in lack of product-market
fit, lack of adoption, high turnover, and difficulty with sales and marketing.

For example if you chose Electron for your app and put no effort whatsoever
into slimming down what you are running inside, users might decide they don't
want to use your app because it uses too much CPU and RAM. If you use a slow
database as your SaaS app/site's backend, your site will be slow and users
might bounce during trial. If you pick an unwieldy, bug-prone, or weird
(a.k.a. hard to hire) technology you might experience a slow development cycle
and find it hard to build enough features or fix enough problems.

Most of the time people won't tell you these things. They'll just move on.
Some of them are subconscious, like performance issues. The app just doesn't
"feel" good, it's not a pleasure to use, etc.

If you are trying to sell shit on a stick, your problem may not be
marketing... but you can always blame it on marketing! If your stack makes
your development cycle slow, maybe you're not finding product-market fit
because you're hiking through the woods with an elephant strapped to your
back.

Good tech choices are fundament. They enable everything else to work well. You
need everything else of course... good tech alone won't cut it. But the rest
of your company's operations are going to flounder if they are not properly
equipped or if the product sucks.

------
motohagiography
Are there any products that people really did want, for people who had the
willingness and ability to pay for them, which are not in the market because
of startup blunders? Put another way, other than being illegal, is there a
problem that growth has not solved?

~~~
andi999
Not having concrete examples, but the book 'crossing the chasm' claims, that
the majority wont buy from you whatever you have and they need unless they
know 2 other companies (succesfully) using your product. Supposedly the step
from a few sales to fully tapping the market is hard even if you have great
products.

------
alexanderdou
One of the big issues I always find with "Closed Lost Reasons"[1] like this is
that it rarely captures the truth accurately. It misses the truth in a couple
of ways:

    
    
       1. Deliberate obfuscation by main actors who want to protect their jobs ("It is difficult to get a person to understand something, when their salary depends on their not understanding it.")
    
       2. Continental drift- the farther you get from the action (or, more likely, the set of actions) that precipitated the event, the more you rely on memory and hearsay
    
       3. "The Rage to Conclude"- humans LOVE denouement, to “know”, to have things wrapped up and make sense. But rarely is the world so simple. We try to boil a set of reasons down into one über-reason
    

So on the factory floor, the people doing the labeling are incentivized to
shift the blame and obfuscate their role in the loss. And then the manager is
trying to sort through all the noise to identify which _set_ of reasons is the
most likely for this loss. There's a lot lost in translation from the "truth"
of how the deal was actually lost.

\------------------

With this particular article, I categorize it in "content marketing babble":
advice that is generalized to the point that it is not useful to me. The
__Common Lessons __section leaves me with general advice but no tractable ways
to understand what that looks like in the real world with real constraints and
stresses.

IMO, the __Lean: validation __section could be extremely valuable IFF they
supplied hard examples from the failed startup dataset that fueled this
article. Like "Here are links to the case studies where the team behind
[Closed Company A] felt that they could have spent more time validating before
building. This is the featureset that they built prematurely, and here they
ponder on ways they might have tested it cheaply"

\------------------

All that aside:

I've actually been quite an avid reader of Failory for a couple of months now.
I check in every so often to go over new interviews. I think the interviews
([https://www.failory.com/interview-
failure](https://www.failory.com/interview-failure)) are a lot more useful:
the format allows for more nuance, more context over the conditions of the
business, and more reflection.

I often find myself wanting to ask more questions in-line to the interviewee,
kind of like a hyperspecific, morbid Quora question.

[1] I'm co-opting this term from Sales/Marketing lingo. I originally wrote
Root Cause Analysis, but I know that RCA has a very specific software
definition and set of rituals, so I wanted to

~~~
doonesbury
>Deliberate obfuscation by main actors who want to protect their jobs

Sure. There is mal-adaptive behavior, and it's not consequence free.

>rarely captures the truth accurately

Accurately? There's nothing going on in your reply to suggest you have
distinguished insight to anything. Throwing out three more modalities of
problems amounts to what-aboutism. You have attempted to re-contextualize the
original write-up as disingenuous something we see a lot of pointless
political wrangling.

The salient question is what we can agree on as to common failure modes,
rather than that argue without intersection. No accounting can be complete,
and beyond some level of specificity more detail is useless. We're looking for
20% of the causes that explain 80% of the bad outcomes. Think Chaos Report
that had a good run in the 1990s.

------
wmab
TLDR: Buy a copy of the Lean Startup, read it, action it.

~~~
nostrademons
Note that following the lean startup method does not itself guarantee success.
I know at least a half dozen founders who have followed the Lean Startup
method (several of whom were actually _in Steve Blank 's class at Berkeley_),
and in all cases the result of their 100 interviews was "Welp, nobody wants
that product." Which I guess is preferable to investing 3 years and $15M in
venture capital into it, but it also doesn't get you any closer to a
successful startup. (When I followed the Lean Startup method myself, it was
actually worse - our 100 interviews said "Yes, we definitely want it", we
built it, and then nobody used it. At least I took every engineering shortcut
possible to build & validate it quickly and didn't waste time making it
bulletproof before people tried it out.)

Also interestingly, a large number of gigantic corporations today did _not_
follow the Lean Startup method, and arguably weren't trying to found a startup
at all. Apple, Google, Facebook, E-bay, Dropbox, AirBnB - they were founded
because their founders were curious and trying to scratch their own itch, and
it turned out lots of other people had that itch too.

If I had to distill lessons learned from about a decade in startups (7.5 years
founding ones of my own and 2.5 years working for other people), it'd be
"Trust my emotions more, be curious, and quit trying to found a damn startup."
The problem is that you need to judge new ideas emotionally rather than
rationally, but when you have the "I'm going to build something awesome and
get totally rich" mentality, it distorts all your emotions. Better to get rich
by working in finance or for a FAANG, reserve some time on the side to
explore, and only set out on your own when there's something incredibly
exciting on the table.

------
HungryHarold
Great article

------
inetknght
My initial thoughts:

> _First hand lessons_

> _over eighty failed startups_

I dunno... if you've got _first hand_ experience in 80 startups then maybe
their failures are because you didn't spend enough time in any single one of
them.

Then I read the article:

> _We 've analyzed why +80 startups have failed_

If you've analyzed the startups then I really don't think that counts as
"first hand".

~~~
nothinghere789
first hand means you got the info from the first or original source.

~~~
RSZC
That's an unusual definition of first hand...

Here's Merriam-Webster's:

> obtained by, coming from, or being direct personal observation or experience

These lessons are not from the OP's direct personal observation or experience.

------
capnorange
weird usage of the term "Marketing" to mean business related(product market
fit, competition etc).

~~~
disease
Event "product market fit" feels like a sugar-coated way to say that no one is
interested in purchasing your product.

I don't have a startup, but if I did I would view every single step in the
process of creating one, both technical and non-technical, as an opportunity
to test the market viability of your product.

I'm honestly surprised at the abundance of non-product-viability issues that
were cited as determining factors. Maybe this reality is hard to face?

~~~
jandrese
You can't even say that a product failed because nobody wanted it. All you can
say is that nobody you asked was willing to pay what you were asking. I've
seen plenty of promising products die because the company wants to only offer
it as a service with ridiculous licensing requirements presumably out of fear
that some customer is going to build a billion dollar business out of it and
not give them a cut of the gross.

It has to be really frustrating for startup CEOs to fold and then see a bad
copy of their idea appear as free software and explode in popularity.

