Why Startups Fail - Startup Problems - For Entrepreneurs

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Reason 1: Market Problems

A major reason why companies fail, is that they run into the problem of their being little or no
market for the product that they have built. Here are some common symptoms:

There is not a compelling enough value proposition, or compelling event, to cause the buyer
to actually commit to purchasing. Good sales reps will tell you that to get an order in today’s
STARTUP HELP
tough conditions, you have to nd buyers that have their “hair on re”, or are “in extreme pain”.
 Matrix Growth Academy –
You also hear people talking about whether a product is a Vitamin (nice to have), or an
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Aspirin (must have).
The market timing is wrong. You could be ahead of your market by a few years, and they are
not ready for your particular solution at this stage. For example when EqualLogic rst
launched their product, iSCSI was still very early, and it needed the arrival of VMWare which
required a storage area network to do VMotion to really kick their market into gear.
Fortunately they had the funding to last through the early years.
The market size of people that have pain, and have funds is simply not large enough
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Reason 2: Business Model Failure  2018 SAAS Private Survey
Results- Part 1
As outlined in the introduction to Business Models section, after spending time with hundreds of
startups, I realized that one of the most common causes of failure in the startup world is that LANGUAGES
entrepreneurs are too optimistic about how easy it will be to acquire customers. They assume
that because they will build an interesting web site, product, or service, that customers will beat a English
path to their door. That may happen with the rst few customers, but after that, it rapidly Español (Spanish)
becomes an expensive task to attract and win customers, and in many cases the cost of
acquiring the customer (CAC) is actually higher than the lifetime value of that customer (LTV).
The observation that you have to be able to acquire your customers for less money than they will
generate in value of the lifetime of your relationship with them is stunningly obvious. Yet despite
that, I see the vast majority of entrepreneurs failing to pay adequate attention to guring out a
realistic cost of customer acquisition. A very large number of the business plans that I see as a
venture capitalist have no thought given to this critical number, and as I work through the topic
with the entrepreneur, they often begin to realize that their business model may not work because
CAC will be greater than LTV.
The Essence of a Business Model RELATED ARTICLE
As outlined in the Business Models introduction, a simple way to focus on what matters in your
business model is look at these two questions:
Can you nd a scalable way to acquire customers

Can you then monetize those customers at a signi cantly higher level than your cost of
acquisition
Thinking about things in such simple terms can be very helpful. I have also developed two “rules”
around the business model, which are less hard and fast “rules, but more guidelines. These are BUILDING FOR SUCCESS
WebSummit Presentations
outlined below:
The CAC / LTV “Rule”
The rule is extremely simple:
CAC must be less than LTV
CAC = Cost of Acquiring a Customer

LTV = Lifetime Value of a Customer
To compute CAC, you should take the entire cost of your sales and marketing functions,
(including salaries, marketing programs, lead generation, travel, etc.) and divide it by the number
of customers that you closed during that period of time. So for example, if your total sales and
marketing spend in Q1 was $1m, and you closed 1000 customers, then your average cost to
acquire a customer (CAC) is $1,000.
To compute LTV, you will want to look at the gross margin associated with the customer (net of
all installation, support, and operational expenses) over their lifetime. For businesses with one
time fees, this is pretty simple. For businesses that have recurring subscription revenue, this is
computed by taking the monthly recurring revenue, and dividing that by the monthly churn rate.
Because most businesses have a series of other functions such as G&A, and Product
Development that are additional expenses beyond sales and marketing, and delivering the
product, for a pro table business, you will want CAC to be less than LTV by some signi cant
multiple. For SaaS businesses, it seems that to break even, that multiple is around three, and that
to be really pro table and generate the cash needed to grow, the number may need to be closer to
ve. But here I am interested in getting feedback from the community on their experiences to test
these numbers.
The Capital E ciency “Rule”
If you would like to have a capital e cient business, I believe it is also important to recover the
cost of acquiring your customers in under 12 months. Wireless carriers and banks break this rule,
but they have the luxury of access to cheap capital. So stated simply, the “rule” is:
Recover CAC in less than 12 months
Reason 3: Poor Management Team

An incredibly common problem that causes startups to fail is a weak management team. A good
management team will be smart enough to avoid Reasons 2, 4, and 5. Weak management teams
make mistakes in multiple areas:
They are often weak on strategy, building a product that no-one wants to buy as they failed to
do enough work to validate the ideas before and during development. This can carry through
to poorly thought through go-to-market strategies.
They are usually poor at execution, which leads to issues with the product not getting built
correctly or on time, and the go-to market execution will be poorly implemented.
They will build weak teams below them. There is the well proven saying: A players hire A
players, and B players only get to hire C players (because B players don’t want to work for
other B players). So the rest of the company will end up as weak, and poor execution will be
rampant.
etc.
Reason 4: Running out of Cash

A fourth major reason that startups fail is because they ran out of cash. A key job of the CEO is to
understand how much cash is left and whether that will carry the company to a milestone that
can lead to a successful nancing, or to cash ow positive.
Milestones for Raising Cash
The valuations of a startup don’t change in a linear fashion over time. Simply because it was
twelve months since you raised your Series A round, does not mean that you are now worth more
money. To reach an increase in valuation, a company must achieve certain key milestones. For a
software company, these might look something like the following (these are not hard and fast
rules):
Progress from Seed round valuation: goal is to remove some major element of risk. That
could be hiring a key team member, proving that some technical obstacle can be overcome,
or building a prototype and getting some customer reaction.
Product in Beta test, and have customer validation. Note that if the product is nished, but
there is not yet any customer validation, valuation will not likely increase much. The customer
validation part is far more important.
Product is shipping, and some early customers have paid for it, and are using it in production,
and reporting positive feedback.
Product/Market t issues that are normal with a rst release (some features are missing that
prove to be required in most sales situations, etc.) have been mostly eliminated. There are
early indications of the business starting to ramp.
Business model is proven. It is now known how to acquire customers, and it has been proven
that this process can be scaled. The cost of acquiring customers is acceptably low, and it is
clear that the business can be pro table, as monetization from each customer exceeds this
cost.
Business has scaled well, but needs additional funding to further accelerate expansion. This
capital might be to expand internationally, or to accelerate expansion in a land grab market
situation, or could be to fund working capital needs as the business grows.
What goes wrong
What frequently goes wrong, and leads to a company running out of cash, and unable to raise
more, is that management failed to achieve the next milestone before cash ran out. Many times it
is still possible to raise cash, but the valuation will be signi cantly lower.
When to hit Accelerator Pedal
One of a CEO’s most important jobs is knowing how to regulate the accelerator pedal. In the early
stages of a business, while the product is being developed, and the business model re ned, the
pedal needs to be set very lightly to conserve cash. There is no point hiring lots of sales and
marketing people if the company is still in the process of nishing the product to the point where
it really meets the market need. This is a really common mistake, and will just result in a fast
burn, and lots of frustration.
However, on the ip side of this coin, there comes a time when it nally becomes apparent that
the business model has been proven, and that is the time when the accelerator pedal should be
pressed down hard. As hard as the capital resources available to the company permit. By
“business model has been proven”, I mean that the data is available that conclusively shows the
cost to acquire a customer, (and that this cost can be maintained as you scale), and that you are
able to monetize those customers at a rate which is signi cantly higher than CAC (as a rough
starting point, three times higher). And that CAC can be recovered in under 12 months.
For rst time CEOs, knowing how to react when they reach this point can be tough. Up until now
they have maniacally guarded every penny of the company’s cash, and held back spending.
Suddenly they need to throw a switch, and start investing aggressively ahead of revenue. This
may involve hiring multiple sales people per month, or spending considerable sums on SEM. That
switch can be very counterintuitive.
Reason 5: Product Problems

Another reason that companies fail is because they fail to develop a product that meets the
market need. This can either be due to simple execution. Or it can be a far more strategic
problem, which is a failure to achieve Product/Market t.
Most of the time the rst product that a startup brings to market won’t meet the market need. In
the best cases, it will take a few revisions to get the product/market t right. In the worst cases,
the product will be way off base, and a complete re-think is required. If this happens it is a clear
indication of a team that didn’t do the work to get out and validate their ideas with customers
before, and during, development.
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John taylor • 7 years ago
Really good read and just sent link to my two business partners. “When to hit the accelerator
pedal” is the most
difficult and most speculative challenge we have in our industry as our product
that is weather retaliated regards to demand.
Will revisit more than once!
6△ ▽ • Reply • Share ›
David Skok Mod > John taylor • 7 years ago

John, I wrote more on the topic of when to hit the Startup Accelerator Pedal in this blog
post: http://www.forentrepreneurs...
It might be of help.
Best, David
Ian > John taylor • 7 years ago

Agree fully, will keep coming back too
cazcade • 9 years ago

Hi David
So in slightly more than 140 characters :)
My questions are about the scenario of a company who is attempting to get maximum market
penetration and are likely to try and avoid recuperating their cost of acquiring customers - as
almost every means of doing so may either deter the customer from using the product or will
push them into the hands of a competitor. These companies of course have an end goal to
saturate the market, then when there is no room left for competition and the customer is
already hooked they can safely introduce ways to make profit without fear of deterring
customers. This is the pattern I’ve seen for many high tech consumer market startups such as
Google, Facebook and now Twitter. So for a company who are truly subject to the network
effect like these companies they must be either huge or nothing to survive. In their case the
goal surely is not to recuperate their cost of acquisition in say 12 months but instead over a 5-
10 year period once they have dominated their market.
In general my comments on Twitter relate to the fact that no matter how good the advice from
VCs they inevitably contradict one another and also contradict success stories. I’ve started to
come to the belief that actually the complexity of predicting the success of the startup is so
incredibly high that actually no matter what rationale people place on why they back a
particular company, it is their ‘gut instinct’ that actually makes the choice. Then once decisions
are made, both the fundamental attribution error and survivor bias kicks in causing us to look
at the patterns between successful companies and not the conditions that helped them be
successful or the companies who were just like them but failed :)
That said it does no harm for me to look for the patterns in advice from VCs/Angels to help
identify weaknesses that can be strengthened.
Would love to hear your thoughts David.

David Skok Mod > cazcade • 9 years ago

Neil,
Thanks for taking the trouble to explain this more clearly. The piece of my advice that I
believe you are referring to is the "business model failure" where entrepreneurs are too
optimistic about the cost acquire their customers.
When I look at Google, Facebook and Twitter, I see three companies that managed to
achieve true viral customer acquisition, which means that their costs to acquire
customers were amongst the lowest you will find. Granted they did have some costs,
but compared to other companies, they were extremely low. In my book, these
companies represent the ultimate best investment around: very low CAC (cost of
customer acquisition), sticky, good barriers to entry, and with enough customer
engagement that even though it may not have been clear immediately what was the
best monetization, there was very strong evidence to suggest that there would be some
good options.
The business models that fail are the entrepreneurs that believe they will be lucky
enough to get true viral growth (like Google, Facebook, and Twitter), and are not able to
pull that off Unfortunately there are really only a very small handful of companies that
see more
Venky > David Skok • 6 years ago

David,
For Twitter and Facebook, it would be appropriate to say that they have low user
acquisition cost. I would imagine a customer is one who pays for the service. By
that definition, the customers of Facebook are the ones who pay for Facebook
ads.
Show more replies
Glen Hellman • 6 years ago

Reason 3, Poor management team is the only reason. All other reasons are symptoms of poor
management.
David Skok Mod > Glen Hellman • 6 years ago

That is why we VCs focus so heavily on the management team. However you can have
great individuals who could become a strong management team, who just don’t have
the experience to know what mistakes to look out for. Which is why I like to share as
many of my own lessons as possible on this blog. Do you have any of your own that are
worth sharing?
Glen Hellman > David Skok • 6 years ago

Lack of focus. Trying to fight on too many fronts and not using capital efficiently,
chasing short term dollars that take you out of your wheel house.
My blog on it: http://www.drivenforward.co...

Show more replies
Show more replies
Minh-Hoang Nguyen • 4 years ago

Thanks for great posts. Full of information about failures. If anyone wants to figure out why
failed and tracking failures in lifetime, check the FailED app at https://itunes.apple.com/us... .
It's really great and helpful for everyone!
Harrey Martin • 6 years ago

Informative article, Every entrepreneur should need to know these reasons, (Why Startups
Fail).
http://www.sharetipsexpert....
Ed Rod • 6 years ago

David - Thanks for your blog. This is a good post, and of course the short nature of a blogpost
leaves many tangles we can unweave.
Some of the commenters on this post seem to compare their business' customer acquisition
struggles versus the experience at Facebook, Twitter and Google. They should understand
that the fact that you do affiliate marketing or SEO does not put your business model in the
same league with those entities. A true eco-system lock-in business model benefits from
superior network effects because other parties are linking into that platform. (eBay is a classic
example) Being first to market with the right value proposition leads to customer acquisition
scaling, and the linkages that benefit other parties create switching costs/barriers to exit.
When you hit a eureka opportunity, I agree that venture capital can subsidize sales and
earnings in order to dissuade new entrants, but the business model has to at least theoretically
be able to generate a positive cash flow and earnings without the subsidies because some day
the investors well will inevitably run dry. Investors may have already cashed out, but whether
through IPO or acquisition or partnering, the business that's left must have customers willing to
pay for its value proposition to a degree that meets hurdle rate expectations. I think that's
where you were going with the 12 month recovery of CA costs rule of thumb.
I know that it is out of favor these days to sound so much like an MBA, but entrepreneurs really
should understand these concepts before they jump into the pool. Understanding these
concepts will help them understand their probable CA costs, the financial metrics of their
business, and their best options to go to market. For example, a 'vitamin' to your end-user may
be a 'pain-killer' to your channel partner. Looking at it only as a "nice to have" value prop may
underestimate a good opportunity.
Sherry • 5 years ago

Is it possible to figure out if an idea will work before taking the money? I have bootstrapped the
company www.carmelosystems.com to get a couple of customers deployed. But made some
mistakes along the way and have not being able to get more deployed. An angel investor is
interested in putting money, but I am now worried about let him down by losing the $1M he
wants to invest. Have not tried your inbound marketing ideas. Could you give some advise?
Am I facing the Market Problem?
Chris Marshall > Sherry • 4 years ago

Hi Sherry, take a look at http://www.agilovation.com/.... I have worked with Zac Lyons in
the past and his agile approach to driving innovation through deep customer insight will
work really well in a situation like yours. He really can help to very quickly understand if
there is a market for your idea. In addition, his results will give you deeper insights to
the target customers pain points and a better understanding of how to talk to/target your
messaging to your potential customers in a language they understand. Regards, Chris
David Skok Mod > Sherry • 5 years ago
Hi Sherry, the key to figuring this out lies in meeting with as many prospective
customers as possible and figuring out if you have built something that they want to buy
(i.e. do you have Product/Market Fit). You should watch out for the difference between
real intention to buy, as evidenced by them talking about placing orders, versus polite
positive feedback. I would also be looking for evidence that this is a repeatable sale
with many customers fitting the same application usage profile. If you can demonstrate
that to the investor by allowing them to talk to those customers, you should be able to
get the investment and use the money to expand your sales and marketing.
For more on Inbound Marketing, visit the HubSpot blog pages, as they are great at
educating people on this topic. Best, David
△ ▽ • Reply • Share ›
Sherry > David Skok • 5 years ago

The investor has talked to customers who rave about the product, I am the one
who is anxious about why there has not been 3 more customers and where/how
to find them. Your post and response made me walk away from the keyboard
and think through a few things. Time well spent. Thank you.
39 △ ▽ • Reply • Share ›
Manas Sahoo • a year ago

As per my advice don't think too much, just start and observe and try to fix the facing problem.
Don't stop in between, market is dynamic, market is volatile. Try to learn, modify and upgrade
the process and system, but don't stop. There are 3 words always management people are
calculating: success, achievement and goal. You can measure all these things but don't give
up, as per the measurement you can boost and upgrade yourself.This is a process of learning
and getting things.
Victor Delgado • a year ago

Hi David - very good blog, I enjoyed reading and learning about startups. I am one of the
founders of Magic Hill Holidays, an educational and experiential holidays provider. My question
is regarding CAC. To calculate the current CAC, other than the variables you mentioned in the
article, do I need to take into consideration any promotional discounts that we offer to the client
as a "cost"? They do affect my P&L forecast if actual discounts are greater than we initially
forecasted and also reduce our margins. But it is not a hard cash cost as we do not actually
use resources. What are your thoughts? Thank you
David Skok Mod > Victor Delgado • a year ago
Hi Victor, I believe that the discounts should appear on the LTV (Lifetime Value of the
Customer) side of the equation, as they reduce gross margin you make from each
customer.
I hope that is clear.

Best, David
David Skok
Matrix Partners
*Blog*: ForEntrepreneurs.com <http: forentrepreneurs.com=""/>
*E*: dskok@matrixpartners.com
*T*: +1-617494-1223
*A*: 101 Main Street, 17th Floor, Cambridge, MA 02142
*Twitter*: @BostonVC <https: twitter.com="" bostonvc=""/>
Victor Delgado > David Skok • a year ago

Yes, I will factor discounts in the LTV. Thank you!
Dmitriy Stoyan • 2 years ago

Hello all! I want to share with you interesting information on this topic. I think this can be useful
for you: https://mlsdev.com/blog/123...
Dmitriy Stoyan • 2 years ago

Hello all! I want to share with you interesting information on this topic. I think this can be useful
for you: https://mlsdev.com/blog/123...
Jenny Maxwell • 2 years ago

Great post, take a look at https://www.leadlake.com/ . Thankyou for sharing
Valery • 2 years ago

Here we interviewed 2 startup founders to know what tech challenges they had in their startups
and how they overcame them https://emerline.com/blog/m...
Thesis Scientist • 2 years ago

good article. Thank You
ezclick • 2 years ago

Great Article! according to my business. Thankyou for sharing.
Annu • 2 years ago

Great article! The content and the description is helpful. Thankyou for sharing with us.
Jacob McMillen • 2 years ago

Great post David. I was recently included in a discussion on this topic - http://clk.im/eacom -
athough many of the issues highlighted were more about the entrepreneur's failure as opposed
to the business' failure.
Stuff like "focusing on the wrong things", "neglecting due diligence", or "hiring the wrong
people" came up a lot, similar to what you mention here.
I'd be curious to know, based on your experience, whether you feel the idea/model or the
execution tends to be the primary cause of failure more often than not?
Raj Anand • 2 years ago

Very interesting ready, just waned to add my two pence. Everybody knows why badly
managed businesses fail. What's more interesting, is how companies like Yahoo, Myspace,
and Dell seemed to do everything right and still didn't survive to remain market leaders.
According to professor Clay Christensen from Harvard Business School put forward a *Theory
of Disruptive Technology* to explain why :
In every market there's a trajectory of performance improvement that customers are able to
make use of but where this trajectory lies is different from one customer to the next. Some
customers can be satisfied with very basic levels of performance, while others are demanding
and will only feel satisfied by very high levels of performance.
Disruptive technologies enter the market offering very low performance but their performance
steadily improves. So, in the early days of a disruptive technology the new innovation is
considered to not be good enough by most of the market but seems perfectly acceptable to
those customers that never really asked for more.
This small group of customers, often referred to as ‘early adopters’, might be attracted by the
fact that this ‘barely good enough technology’ is less expensive or offers them a bit of new
functionality that the old technology simply didn't provide
see more
Mitali Bahl • 2 years ago

Good read! This post explains what do we need to know before starting a business. Thanks for
sharing. Here you can see top 5 challenges CEOs face and how one can overcome it -
http://cxoamerica.org/ceo/t...
10G-force.com • 3 years ago

From our company's experience - bugs found- in product, website, everything else. Quality
matters!I recommend 10G-force.com
christin thomas • 3 years ago

thank you David for this wonderful article, gave me an insight into the key problems faced by
an entrepreneur. i have an online automobile sales website which presently focuses at the
Indian automobile market.. the main problem i face is securing an investment . any suggestion
on how to navigate these waters?
David Skok Mod > christin thomas • 3 years ago
Look up the list of local VC firms and Angels, and then scour your network using
LinkedIn to find a person that knows them and can make an intro for you.
Global CPA/CFO/Accounting • 3 years ago

One of the most reasons why startups fail is lack of money management. Therefore, it's very
essential to have an experienced CFO. Our outsourced CFO helps startups to solve common
financial mistakes at an very affordable rate. Visit us at: http://bit.ly/1tvoWmr
Rasheed • 3 years ago

Hi, David,
what do you meant by "they run into the problem of
their being little"? will you please elaborate or else are you talking about little as small business
companies?
Thank You
David Skok Mod > Rasheed • 3 years ago

Sorry - the language is not that clear. It was meant to be taken in context of the rest of
the sentence. So it means "too small of a market".
Taral Patel • 3 years ago

Hello, very well written post. I have my self to tried to list out some of the challenges faced by
Startups today.
While there are some challenges that are tough to address, I have tried to provide solutions for
most of through Digital PR.
You can have a look at how many of the Startup issues can be solved by using Digital PR
techniques.
http://www.prmention.com/bl...
Sara • 3 years ago

Very valid reasons! Thanks for sharing, it is very helpful. I know an online course which also
talks about start up company failures and success reasons. It is mostly based on
entrepreneurship . Take a look into it for more details on this subject area
https://www.classle.net/#!/...
Yashash Dave • 3 years ago

David, what i have experienced in all my time trying to pursue a startup idea is to find a
credible way of knowing how and what amount of money the idea can pour into the startup if
everything is done correctly.
Ex - If i have a idea i feel is great enough to pursue will at time give me a lot of doubts whether
it can fetch the startup enough money to put everything in the light and whether can it sustain
the world for longer times ?
Please suggest.
David Skok Mod > Yashash Dave • 3 years ago
The key to figuring this out is customer validation. Prior to putting any significant money,
the recommendation is that you spend a lot of time talking to potential customers asking
them very specifically: “if I build this, will you purchase it?” and “how much would you
be wiling to pay?”. Many entrepreneurs are too scared to ask these questions, and then
discover after spending a lot of money building their product that the customers aren’t
willing to purchase it. It is far better to find that out before you spend the time and
money building the product.
Then while you are building the product, keep going back to those customers and
finding new customers, and continue to test these same questions, while demonstrating
prototypes, and early demos.
I hope this helps.
Best, David
Yashash Dave > David Skok • 3 years ago

Hi David, Apologies for late reply.
Your answer is helpful but what if my prospective customers belong to the same
industry? (As in my case!)
Wouldn't me asking any such questions reveal my idea & endanger it because
what i can do with my idea is possible for them too.
Show more replies
Julius Haralampo • 3 years ago

Fantastic read. Very very insightful.
Presentation Guy • 3 years ago

Can I email you please. I need advice
David Skok Mod > Presentation Guy • 3 years ago
I have emailed you with that directly.

Reece Larkin • 4 years ago

There are a couple of issues in terms of conquering the majority of your startup issues. These
are; Funding, Product Nature, Time Management, One Man Show and Running Costs.
I'll quickly say these over, these will inconclusively help you to succeed in your startup.
How about we begin with Funding. Most and each startup needs funding to get some place.
Most startups will close because of money issues. This is the reason funding is fundamental to
any startup. There are more than 500 crowdfunding stages over the web that help you group
finance your startup. Some of which incorporate; Kickstarter, IndieGoGo, CrowdFunder,
RocketHub and significantly more!
Presently, the Product Nature. As a startup you must recognize what the product or
administration you're putting forth. Is it a thing or an administration that your client might want
to have or is it an unquestionable requirement have product or administration. Having this
basic rationale on your product nature you can really tempt your clients.
Time Management is by a wide margin a super vital thing required by startups. It's not difficult
to ace either! A genuine business person will have the best Time Management, knowing when
to complete for the day and when to not. Most marriage breakups are because of
mismanagement of time, so don't simply concentrate on beginning your business! Have a
basic calendar you can clear your brain from business for quite a while and go through it with
family and companions.
One Man Show. Most businessmen will startup their business without anyone else, this can be
to a great degree unpleasant for yourself and can prompt business disappointment. To prevent
this from happening, you require someone to help you, take a portion of the weight off your
shoulders. This comes in with the time management above, sparing time and being careful.
Running Costs relying upon your startup your product might or not over keep running in costs.
At that point after all your diligent work, your business to fizzle. To prevent this from happening
is to arrange well ahead of time, deal with your needs and have an arrangement to verify this
doesn't happen
Read in more detail at SpellBrand: 5 Tips to Overcome Your Startup Problems

Reece Larkin • 4 years ago

I must echo point 4. Running out of cost. Once you've figured your business out you need to
make a financial plan. Otherwise down the line, your business will fail, and you will run out of
funding.
A few more points that wasn't mentioned in this article are; One Man Show. Most startups are
run single handed, and startup founders think they can do this all by themselves, however the
real facts are that it will effect your business quite a lot. So, you need a mate and some men to
sail your ship more smoothly and safely.
Some extra points can be found on this article: http://www.spellbrand.com/5...

David Skok Mod > Reece Larkin • 4 years ago
Thanks for adding to the discussion.

Nimish • 4 years ago

David can you please tell what strategies to adopt for research and development?
I am tryin to develop an app for the construction industry in India.
David Skok Mod > Nimish • 4 years ago
The best recommendation I can give you is to find a technical co-founder who knows
how to build such a product, and can help you hire a technical team. Best, David
TopChart • 4 years ago

What we have found so far is that it is simple: startups either have a market or not. Weigh in on
it here: http://www.topchart.io/proj...
Sunil Kumar • 4 years ago

Hi Everyone, i have one query on product based startup. I have IT based idea and i am not
technical guy. What should i do ? Outsourcing would be good idea or consider a technical
partner. Or should i drop the idea? Could you please guide me? Many many thanks to you all
in advance.
David Skok Mod > Sunil Kumar • 4 years ago
I'd strongly advise getting a technical co-founder.
Best, David
Sunil Kumar > David Skok • 4 years ago

Thanks a lot David for your suggestion. what happens i wont be able to find
technical co-founder. in that case i should not be thinking of start such project.
David Skok Mod > Sunil Kumar • 4 years ago

Yes - that is the advice that I would give you.
Shahin Khani • 4 years ago

Check out my conversion with Lawrence Pingree on why startups fail
http://www.howtofindajobin1...
David Skok Mod > Shahin Khani • 4 years ago

Thanks for adding. Interesting!
Ankush Katiyar • 5 years ago

Sharing my personal experience, what I believe is ideas never fails, execution fails. People
when get started are full of enthusiasm but with the passage of time they get low and at last
they shut it down such some excuse.
I have published a post on my blog. Link is here http://www.conhacks.com/201...

Rodrigo Hernandez • 5 years ago

is this area51 an example of business model with test plan to startups ? more info in
http://area51.stackexchange...
David Skok Mod > Rodrigo Hernandez • 5 years ago

Sorry – I don’t know enough about it to answer your question.
Netguru • 5 years ago

Good read! We're recently also posted a note about startup failures - one of other reasons is
choosing the wrong location https://netguru.co/blog/pos...
Kamile Ko • 5 years ago

For me it seems, that the main reason for startsup failure is not appropriate time allocation :)
The large part of time is spent on things that can be done by technologies and that saved time
may be used in such a ways like- making contacts or searching for new ways for business :)
So believe me, and do not let for your startup to fail. Technology that I use looks like- Verslo
valdymo sistemos :) Try, I believe you will not regret
Joson Arimpur • 5 years ago

A nice article. I must be read by all the aspiring entrepreneurs.
vallman • 5 years ago

I love this article! Thanks.
Tom Psillas • 5 years ago

Hitting the pedal is easier, once you have a proven business model.
It just takes the right investor with the right amount of cash and expertise to connect you to
those than can tune your business for rapid scaling.
You, as a founder, have to be able to step aside and let the right management step in to
execute your proven business model.
It may be your baby, but you may not be able to handle raising adults. Step aside and let your
investor contacts scale your business. They have already been through the issues that will be
new and foreign to you.
Leave your ego at the door and enjoy your success!
pickychewy.com • 5 years ago

I agree, I have experience some of the mistakes mentioned here. Well written!
John Kober • 6 years ago

The article is very informative.Iam trying to lift my start up but takes a long time.Sometimes it's
depressing too.Our site is www.metrolistings.org. Any personal advice would be appreciated.
Charlie King > John Kober • 5 years ago

John,
Apologies for the 3 month delayed comment as well :-) Remember, the startup process
is a PROCESS. Being a Doctor is considered the "practice of medicine", as no one
knows it all, and it's a forever learning process. Same with startups. Each is different
and will have its own trajectory.
Entrepreneurs are famous for doing it all alone, all by themselves. It's completely
normal to have hiccups in your startup feel like a reflection of you, because your startup
is YOUR baby :-) Having an objective sounding board (advisors, consultants, board), a
cheerleading squad (friends, spouse, early adopters) and a safe place to debrief,
download and be heard (a Coach's role) are critical support structure for entreprenurs.
Www.charliekingcoaching.com
Jimmy Cox > John Kober • 6 years ago

I realize this was 3 months ago, but I checked out your website. Looks like a better
version of craigslist. In all honesty, that's why it's not successful. Craigslist was
something that went viral, so its embedded in peoples minds and lives. A knockoff of
something people already know needs to offer something substantially more to divert
them away. Slightly more fancy, and a couple of of new additions don't necessarily blow
my mind. I would need to be mind blown to change my ways. People don't want to
change for anything unless what ever it is screams change at them.
Sorry to bash down on your start up, I'm only being truthful. The idea is fundamentally
sound. I fully agree there needs to be a new craigslist that offers more, but make the
idea your own. With modifications to the navigation of the page, and some major
benefits to a user to access your page, it may work.
I'm only a novice and don't even have my own start up, but the reason is I'm looking for
the perfect idea, That viral idea. Best of luck with your ventures.
David Skok Mod > Jimmy Cox • 5 years ago
Jimmy - thanks for jumping in and helping.

Show more replies
Carmen Tejedor • 6 years ago

Really good post. The headlines of this post could be the following:
- Is your product an aspirin or a vitamin? (I love the sentence)
- When to hit the accelerator pedal. I completely agree with your explanation.
Thanks!
Ali • 6 years ago

Excellent research! Very well written article.
eddiemm • 6 years ago

great article! complex thoughts put simply.. great and inspiring writing.. very useful to me..
thanks..
Tarik Zawdie Kiddoe • 6 years ago

Excellent insights.
Roshaun Bay-c Clarke • 6 years ago

Very insightful. CAC in relation to LTV seems most critical for any business aiming for real
profitability and success
Erik Ciceraro • 6 years ago

Thank you for passing down some insight on this topic!
Vivek Patil • 6 years ago

Nice Article for startups.. now i came to know main factors of startups .. thanks for sharing..
www.recepttechnology.com
tchamp77 • 6 years ago

I find it funny that you start reason 4 with, "a SECOND major reason..." so does that mean
reasons 2 and 3 are not "major"??? If not, why are they not at the bottom?
Sathishkumar Duraisamy • 6 years ago

Hi,
Is there any research data that supports above answer.

Sheddy • 7 years ago

I think this article was good in how it pointed out the fine easily overlooked details.
karv smith • 7 years ago

Running out of the Cashflow Problems is some time become start up fail main reason..
David Skok Mod > karv smith • 7 years ago

Agreed!
Peter • 7 years ago

Every entrepreneur should read this! Because of my sales background I was one of those
business owners over confident, figuring it would be easy to acquire customers. I have learned
the hard way, and have had to settle for organic growth (which is frustrating because we have
a scalable product). Even with major affiliate contracts/target marketing I have found it is very
difficult to attract a mass of new customers. I have build a proprietary product with a very high
value proposition. However, I failed to realize I knew very little about efficient marketing. In my
business, I have to be careful of my marketing initiatives, the wrong marketing could deliver
nightmare customers and drive my CAC sky high. I'm tying to find a balance. Any
suggestions?
David Skok Mod > Peter • 7 years ago

The best advice I can give you here is to start Inbound Marketing. I have a short post
on it here: http://www.forentrepreneurs.... The folks at HubSpot invented this term, and
their website is full of terrific educational content on the topic. It will result in a steadily
growing flow of leads at a very low cost, that usually convert at a higher rate than paid
leads.
Jonathon • 7 years ago

Great read, went self employed two years ago and all this applies!!
Ian • 7 years ago

This is a great post, read once, then again and now I have printed and will read again until it
sinks in. Going to share with all of my team, need more articles like this.
These comments all make sense, the running out of cash is so true, be careful of this pitfall!.
Thanks, look forward to reading more.

Small Business Ideas • 7 years ago

This reminds me of an article on my blog on the major causes of business failure. Failure can
be avoided even if success is not guaranteed, I guess a good starting point for success in
business will be to review causes of failures such as the ones you have outlined here.
Great post!
web design perth • 7 years ago

Thanks for taking the trouble to explain this more clearly. The piece of my advice that I believe
you are referring to is the "business model failure" where entrepreneurs are too optimistic
about the cost acquire their customers.
Muthu Arumugam • 8 years ago

It's a great article and thanks for this. It was a touch decision to set the pricing since we are all
first time entrepreneurs and happened not to raise so far. But we changed the pricing couple of
times to find the right one for our existing customer base. How do we balance between not
changing too many times or pivot when needed?
David Skok Mod > Muthu Arumugam • 8 years ago

That is a really hard question for me to answer without knowing a lot more about your
specific situation. I believe you should trust your own judgment on this, even though it
may be hard to make a decision.
Ken Ashley • 9 years ago

Another reason startups fail is that the entrepreneur doesn't recognize his or her weaknessess
and how to apply best practice policies to improve those weaknesses. There are 19 key
categories that research has shown which govern the operational success of a company. If you
know how you score in each you can develop a strategy to focus on the areas which would
have the quickest and biggest positive impact. Building a successful company is a process.
Vikky01222 > Ken Ashley • 5 years ago

Please let me know where I can find the 19 key categories listed for Operational
success of the company.
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a Home / BUSINESS MODEL

Reason 1: Market Problems

The Essence of a Business Model RELATED ARTICLE

Can you nd a scalable way to acquire customers

The CAC / LTV “Rule”

The rule is extremely simple:

CAC must be less than LTV

CAC = Cost of Acquiring a Customer

The Capital E ciency “Rule”

Recover CAC in less than 12 months

Reason 3: Poor Management Team

Reason 4: Running out of Cash

Milestones for Raising Cash

What goes wrong

When to hit Accelerator Pedal

Reason 5: Product Problems

Business Model Star tup Help

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John taylor • 7 years ago

Will revisit more than once!

David Skok Mod > John taylor • 7 years ago

Ian > John taylor • 7 years ago

cazcade • 9 years ago

So in slightly more than 140 characters :)

Would love to hear your thoughts David.

David Skok Mod > cazcade • 9 years ago

Venky > David Skok • 6 years ago

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Glen Hellman • 6 years ago

David Skok Mod > Glen Hellman • 6 years ago

Glen Hellman > David Skok • 6 years ago

My blog on it: http://www.drivenforward.co...

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Minh-Hoang Nguyen • 4 years ago

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Sherry • 5 years ago

Chris Marshall > Sherry • 4 years ago

David Skok Mod > Sherry • 5 years ago

Sherry > David Skok • 5 years ago

Manas Sahoo • a year ago

Victor Delgado • a year ago

David Skok Mod > Victor Delgado • a year ago

I hope that is clear.

Victor Delgado > David Skok • a year ago

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