- On June 12, 2018
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- business, entrepreneurs, entrepreneurship, innovation, startups
And the obligatory question is: ¿Do you think that every entrepreneur is forced to fail during their entrepreneurial journey? Maybe with the purpose of improving and coming back with a different, innovative business model after having conducted a post-mortem analysis.
CB Insights, a company that collects and analyzes big data, has conducted a study on 101 failed entrepreneurship projects in order to determine 20 reasons why they did not succeed.
Forty-two percent of the founders and investors who took part in the study consider that the main flaw is the lack of the need for the product or service in the market, according to the post-mortem analysis.
In other words, many entrepreneurs offer products or services that no one wants, which explains why their value proposition means nothing to the market. This leads to failure because entrepreneurship is based on giving a solution to a real, tangible and measurable problem assuming that there is a community willing to pay for it.
Steve Jobs, co-founder of the famous Apple, once came up with this quote: “A lot of times, people don’t know what they want until you show it to them.”
Most of the passionate entrepreneurs may have considered it as their first stone-written commandment. Jobs’ words may have even inspired them to build projects based on the thought that they would be capable of making the market believe in the existence of a need that can be satisfied through their products or services. The truth is that they can almost never make that happen.
Just think about $19-billion innovation projects such as Uber. Thousands of others followed and emerged with private transport solutions that turned out to be frivolous alternatives that nobody needed or wanted. They failed to achieve anything.
The lack of capital or its exhaustion represents the second most common cause considered by the study participants. Twenty-nine percent of the founders and investors involved in the research said it was the main reason why start-ups fail, whereas 23 % identifies the wrong team as an important cause of failure.
Those are the top 3 causes, according to the entrepreneurs and investors who took part in the study.
Nobody wants the product or service
Should this bizarre culture be valid somehow, it is also important to fail at the lowest possible cost. Every entrepreneurship project must be tested in order to determine the minimum viable product. This must be your start point if you want to avoid falling into the cases related to the number one cause of failure.
Let’s assume that it is essential to study the market by conducting research and identifying the unsatisfied needs we can offer solutions to. This is when we must add a fundamental factor like passion, which is the required fuel for entrepreneurs to face the challenge of innovation. We recommend conducting research in those markets preferred by the entrepreneur in order to guarantee the enthusiasm needed during the process.
Running out of money
Steve Hogan, head of a start-up called Tech-Rx, mentions the lack of capital as a symptom derived from other factors that are often ignored by founders and entrepreneurs or their teams. Hogan says that avoiding stupid expenses is an obvious measure at the beginning.
The oxygen of entrepreneurship is cash flow, which explains why the lack of it usually leads to suffocation. Moreover, the lack of the ability to raise funds is also mandatory for entrepreneurs, according to Hogan. Those who fail to develop such skills are more likely to fail.
The wrong circle
The third factor to be taken into account has to do with the wrong team. Every entrepreneur needs a qualified team for every area of their business. The process of planning must include the profiles of the collaborators who will work alongside the entrepreneur.
Nowadays, attitude and emotional intelligence are two factors to be considered by the members of the team. Nobody should pretend that they can develop a business on their own without collaborators who are as passionate as or more enthusiastic than the entrepreneur.