While the entrepreneurial world is very familiar with so-called “birthing” or launch events (especially when these are pitching for investment), full of excitement and optimism about the future as they talk about their new product or service and how it is going to change the world, until recently there have been few approaches or events which consider why start-up businesses fail (even though up to 90% of them do within 2 years according to recent research on new startup ventures across the US). This is partly because in the popularly followed “lean start-up” thinking the concept of “failing fast” means that we quit a market as fast as we are able before it sucks too much money or time and entrepreneurs are encouraged to move on, often immediately to the next startup venture, in many cases, without too much “soul searching”. The problem with this is that we may not have learned the important lessons of why the failure occurred so that we can be better prepared next time. This is why “Start-up funerals” have arisen as a trend in the US and UK in recent times and in this article we’ll look briefly at what benefits such an approach can offer to would-be and existing startup founders and entrepreneurs.
It may sound odd for a going business concern to think in “funeral” terms when it comes to something that has yet to have much (if any) of a life so far in commercial terms. However, thinking about how and why a business has died (or might die in the near future) at the earliest possible stage has a number of advantages, the most significant of which is that it affords a realistic appraisal of what has (in another similar business) and could go wrong, so that an entrepreneur can be shaken out of his or her blindly optimistic view of the future. One way in which this is done is therefore to attend (or organize) a group meeting or startup “funeral event”, which gets failed businesses and entrepreneurs to “pitch” the reasons for their failure to an entrepreneurial audience (in some cases with accompanying somber music and serious speeches). However, an equally valuable approach is for entrepreneurs to do this internally for themselves, either with fellow founders or with the whole startup team. In this scenario the team takes a pessimistic or “black hat” view of the future and lists the many ways in which the business is or could be failing currently or could die in the future without making sure that the risks are being properly managed. The list of actual and possible failures may be many but the following are commonly cited reasons from many “funeral” events in the last couple of years:
1. Lack of cash-flow. This sounds obvious but an estimated 70% of all startup deaths are simply about not having enough or running out of cash, even when success is “just around the corner”.
2. Lack of having a unique value proposition or UVP.Many startups can’t even describe their UVP and continue to be just another variation on a well-trodden product/service or theme in the market.
3. Building a poor or unwanted product or service.Many startups push products or services to market without any customer validation or identified need (the highly risky “build it and they will come” plan).
4. Making poor hires. Finding co-founders needs great care and key roles (CFO, CMO, CTO etc.), especially at the very earliest stages, are just as important – one bad apple really can spoil everything very quickly for a startup.
5. Not building the right team. Not only does the startup need “the right players on the bus” but they need to communicate fully and openly with one another and to be quickly welded (by the CEO) into a high performing team.
6. Failing to pivot or change direction quickly, when necessary. A startup that continues to stick to their original plan, even when they know it is increasingly unlikely to work will quickly waste time and money.
7. Failing to utilize advisers. Startups need advisers in several areas, paid and unpaid and either formally (on a regularly meeting board) or informally though mentoring and coaching.
8. Failure to launch quickly. Many startups spend huge amounts of time trying to get the best possible product or service to market and thereby lose customer interest, when they would have been happy with a minimum viable product or service (MVP).
9. Lack of awareness about competitors and often fast changing market conditions. Many startups claim little or no competition and lots of attainable customers. Not only is this rarely true at the outset, but the situation changes at breakneck speed and will massively hasten a startup’s demise when this is missed.
10. Operational inefficiency/ineffectiveness. Even when the idea is great, the team is perfect and the market is crying out for the product or service, a startup still has to execute flawlessly. Most don’t know how.
These are only some of the more commonly cited reasons for startup failure and there will be many other specific ones that need attention. The point here is that all of the above issues, and many others that the team identifies need attention, not only because they have already caused the “death” of many startups in the past but because they may cause the death of your own startup if you are not extremely careful – forewarned is forearmed – create your own “mock funeral” event before it’s too late.
