Top 4 startup killers
November 4, 2021•4 mins read
Leading a startup to success is no easy endeavor. Recently, we discussed marketing hacks for scaling globally and shared some on-point advice from those who tested their way through to global growth.
This time, let’s take a look at what happens when startup founders don’t do the homework. Learn from these fatal mistakes before heading into full-scale business!
1. Lack of PMF
Product-market fit is a positive scenario and sounds like an ultimate success, however, it’s a starting point rather than a destination. PMF can make or break a business and there are many companies in the startup graveyard proving that. One of the gravestones has RethinkDB (2009–2016) on it – seven years, four funding rounds resulting in over $12M, and the innovative scalable database for real-time web still couldn’t make it. The post-mortem by its founder revealed their main lesson: you’re not in the market you think you’re in – you’re in the market your users think you’re in.
PS. After the startup’s shutdown, RethinkDB technology was acquired by Linux Foundation and the product – which was never the issue – gets to live on.
2. Bad business model
While PMF means focusing on market needs instead of yours, to design the right business model you have to make sure it will work for your company, not only customers. Here’s an unfortunate example of a good guy startup that took care of its customers while neglecting its own benefit – Design Inc., a marketplace for high-quality design work, only lasted a year with over $2M in their funds.
The reason? They allowed designers to autonomously send proposals to clients while charging a small fee for it. Soon the market got saturated – in part because no one was preventing designers and clients from continuing their business independently from the platform. As a result, all resources and effort were redirected to generating new leads and increasing the user base, but there was simply not enough runway left for that. Here’s a more detailed explanation from the founder himself.
3. Pivoting too late
Pivoting is the #1 superpower in the startup world – whether it’s catching an opportunity that has just revealed itself or tackling the damage of previous mistakes. Failing to pivot in time has been a notorious killer of startups for decades.
Remember Kno? Exactly. Kno was one of the first companies to launch tablet computers in 2010 – they were really up to something good and even a little ahead of the game. However, they positioned themselves as an e-learning platform and failed to see that their side product had way more potential. In the meantime, Apple launched the iPad and soon started providing textbooks, leaving no place in the market for Kno.
The reason Kno didn’t survive was failing to pivot. After four years, almost $95M in seven funding rounds, and trying several different solutions, Kno eventually sold the startup to Intel for a bargain.
4. Lack of funds
The most cold-blooded killer on this list, insufficient funding sounds like a common risk to address way upfront. But for tech startups, it’s a bit tricky to define what amount is sufficient – until you learn it the hard way.
Take Anki, for example. The adorable, sophisticated robotics tech was backed with an impressive $182M. Anki products were performing really well in the market, and one of them – Cozmo – was even awarded the best-selling toy of 2017. Nonetheless, it fell apart almost overnight due to a funding round that failed to materialize.
Although hundreds of startups fail and shut down in one of these fatal situations, others stay on the road to success – the trick is noticing and dealing with the risks upfront.
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