

What Kills Startups? A study. - entangld
http://techcrunch.com/2011/08/29/what-kills-startups-blackbox-releases-reportapp-to-help-founders-avoid-the-deadpool/

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pg
"Herrmann said that the team’s research found that of the 90 percent of
startups that fail, 70 percent scaled prematurely"

They must have had a strangely biased sample. Since the Bubble (when it was
common) I've seen few startups do that. What kills startups is making
something users don't want.

~~~
nicholasjbs
Maybe by "scaled prematurely" they mean "started hiring and spending lots of
money before they made something people want."

 _Edit: This wasn't intended to be snarky, I was being serious._

~~~
pg
I assume that's what he meant, but it is comparatively rare. Nowadays most
failed startups die small.

~~~
bjoernlasseh
The way we've defined premature scaling, "making something users don't want"
is included. For example, on the customer interaction metrics, which is what
is used for "actual stage" a startup would be in the discovery or validation
stages (stage 1 or 2). On the behavioral stage if they're making something
people don't want, they're probably focused on streamlining their product or
making it more scalable, which is a stage 3, or efficiency stage action. This
would cause the startup to show up as a Behavioral Stage 3 / Actual Stage 2
and be labeled as premature scaling, just not the drastic kind, that for
example WebVan exhibited — "Behavioral Stage 4 / Actual Stage 1". They had a
team that was completely scaled up without even having shipped their product.

~~~
pg
If I were you I'd just use words in the way they're ordinarily used.

~~~
amirmc
If this is meant to be academic research (and I get the feeling it is), then
it's unlikely they'd be able to use words as they're ordinarily used. Terms
used will have to be clearly defined and stated in order to avoid confusion
and misinterpretation (unless you're suggesting that such definitions already
exist).

Unfortunately, this doesn't make it easy to discuss things outside the
research field.

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kadabra9
Disclaimer: Purely anecdotal evidence ahead.

I've worked for two startups that failed and did consulting work for another
one that idled lifelessly while the founder refused to admit defeat. In
general, aside from having a clunky, ugly product that didn't really solve a
genuine problem, I also noticed another trend:

The founders were too stubborn to recognize or listen to their users (if they
had any). The word "pivot" was not in any of these founders' vocabulary. We'd
look at the data, and see users not touching these new features we added and
instead the founder(s) just shrugged and said, "No, the users just aren't
using the product correctly".

No, you idiot. Your product sucks.

I, along with a few other employees tried in vain to convince the founders
that we needed to stop adding useless features and start listening to the
data, and the founders just decided to try to convince the users to use the
app the "correct" way instead.

This, in turn, led to employees (and even co-founders) basically just giving
up on trying to convince the founder/CEO of a need to pivot, so in essence the
employees had already given up on the product. And when your employees (and
cofounders, ffs) have given up on the product, you've already lost.

interesting read.

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InnocentB
The study indicates premature scaling is the number one cause of startup
failure. Y-Combinator's results seem to indicate the number one cause of
failure among its startups is kind of the opposite: the startup just kind of
peters out, and the founders go work on something else.

I assume this is a result of selection bias on both sides: Y Combinator only
funds extremely small startups (generally 2-3 people), and this study likely
(though I'm having trouble verifying) only includes startups that got beyond
this phase. Does this sound reasonable?

~~~
maxmarmer
Hey Max here...one of the authors of the study,

Our study contains startups that are in stages across the board, (Discovery,
Validation, Efficiency, Scale).

While many of the YC startups don't reach the Scale stage, and maybe don't
scale up their team or or raise too much money, they can still prematurely
scale the product by over-engineering the product and not doing enough
customer development. There are more nuanced case of premature scaling that
are also discussed in the report.

~~~
brlewis
I was going to post here asking what sort of scaling the report was talking
about since asking here would be faster than registering to get the report.
Now I have your answer, but the answer is intriguing enough that I'll probably
go ahead and register.

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torsten1979
It's an interesting study, no doubt. However I keep wondering if you can
really judge a start-up's chance to succeed without taking the actual business
idea/concept as well as the entrepreneur's personality into account. Since
it's very hard to operationalize those, I do understand that you refrained
from including it. I've just got the feeling that the quality of the business
idea and the entrepreneur's traits might be a pretty powerful confounding
variable for what you examine. Therefore it seems necessary to me that these
variables are being controlled somehow. I'd like to illustrate that issue. You
name premature scaling as the most important factor for start-ups to fail.
While this conclusion might not be wrong on the one hand, it may be an
illusion that the premature scaling is the actual reason for failure. As an
example, premature scaling should be very likely to happen to a "megalomaniac"
entrepreneur who just overestimates his business idea's chance to succeed or
its growth rate by far. If megalomania is in place at that stage, one have to
assume that it also was when the entrepreneur founded his business - by highly
overestimating a crap idea who wouldn't have deserved to be turned into a
business. In this case, the business' failure wouldn't have been caused by the
premature scaling (although it seems to be since that's what you were looking
at) but by the entrepreneur's tendency to overestimate the quality of his
idea. That said the premature scaling is just another outcome of the true,
underlying reason for failure - but not a reason itself. It's just an example,
but it might show that it's risky to name your variables as crucial factors
for failure as long as you don't control what the business is based on in the
first instance: the business idea and the entrepreneur's personality. What are
your thoughts on that?

~~~
maxmarmer
The initial idea isn't that important. Entrepreneurs change their idea all the
time. In the report we show that consistent companies or ones that scale
properly, are more focused on discovering whether their idea makes sense where
as companies that scale prematurely are more focused on validating that they
are right. And as far as personality, while it's an interesting variable to
look at in the future, in the end of the day we just look at whether the
company produces results regardless of their predisposition. It's also common
wisdom that there are many different kinds of entrepreneurs that have been
successful.

~~~
torsten1979
I see your point - however I still think that the company's predisposition is
too important to be left out. In this spirit I suspect premature scaling to be
a dependent variable (instead of being a first-level factor).

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marquis
Warning: I filled out 80% of this, stopped for a call then hit the back button
accidentally when I got back. All my input seems to be erased and I'm not
spending another 20 minutes on filling it out again to find out what happens
at the end. (I just submitted this bug to their uservoice).

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Hrothgar15
"98% of startups fail because 98% of startups are unnecessary. They're trying
to solve artificial problems." -Joey Pfeifer

~~~
Hrothgar15
Today I read an article with the headline "How to Pick the Right Idea for Your
Startup." That right there epitomizes exactly what is wrong with startup
culture.

Don't have an idea? Don't have a startup.

Ideally, problems could be solved and ideas implemented without the need to
form a company, get funding, or turn a profit. Those are simply (often
optional) measures that must be taken to help realize the end goal.

~~~
pg
_Don't have an idea? Don't have a startup._

I disagree with that. Some of the better startups we've funded changed their
idea completely during YC.

It's the founders that matter, not the idea. So I'd say instead: if you're not
the right sort of person to start a startup, don't start a startup. But of
course that is a complicated matter to decide because (a) people often don't
know if they are the right sort of person and (b) people change.

~~~
jsdalton
So, why not recruit small teams of awesome founders -- comprised of the right
kind of people -- and "assign" them ideas?

~~~
pg
We already do, kind of. We know that a significant fraction of the groups we
accept will change their idea, and that we can contribute as much of their new
idea as necessary.

Sometimes we even tell people when we accept them that we'll accept them if
they do something different. Greplin was one of those.

~~~
Joakal
Reddit is a more well known example. Do you know what the original idea by the
founders was?

~~~
pg
Ordering fast food on cell phones.

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gabaix
Paul Graham's version on what kills startups:
<http://www.paulgraham.com/startupmistakes.html>

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udits
Only the startups that solve real problems are able to survive. As a startup
you should answer the following questions: 1\. Would you use your own product?
2\. Would you pay for it?

If the answer to both the questions is a BIG yes, then you have a solid
product and a good chance to survive.

~~~
huhtenberg
And

3\. Are you the only one?

:)

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fatalerrorx3
I think another major point that wasn't discussed in the post is that the
startup world is a rocky one. You might be full of confidence in your idea one
day, and then the next day you feel your idea is garbage. It's a roller-
coaster ride, and not everyone can deal with that. Especially until you have
users that are signing up for your service, it's really just your own personal
opinion, you need validation in an idea to continue to give you the confidence
to pursue it no matter what your opinion of it at the moment is

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dennisgorelik
"A core feature is something that is required for your service to deliver
value. For facebook a core feature is the ability to friend people. An email
notification from facebook that someone sent you a message is a nice to have
but not a core feature."

Is it a joke?

Without email notifications Facebook would never grow to any meaningful size
(if at all).

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vikas5678
I'd use this product if the company name was not a required field.

~~~
alanh
Petty quibble. Save it for <https://startupgenome.uservoice.com/> — and note
that if your company doesn’t have a (working) name yet, then you’re too early
stage to see much benefit here. (If it’s a privacy issue, fake the name.)

