Tag Archives: Quora

True Challenge On Startup Failure

What causes startup failure? You may have seen my response to this – I say we don’t know because we can’t get good data – but I like what David Rose says here:

Since a startup is a new business that doesn’t yet exist, the default outcome is for it to fail. Everything has to go right for it to succeed!

David knows. He’s a super angel investor, founder and Chairman Emeritus of New York Angels, and founder of gust.com. I’m quoting from his Quora answer to why startups fail.

On the other hand, when startups are conceived around need, giving value, solving problems, offering something people want or need enough to pay for, then the odds of failure go down.  I bet David would agree with that one. He’s been involved in, founded, and invested in dozens of startups that didn’t fail.

And – despite my mistrust of data on failures – I decided to add what David added in this answer on Quora, namely data based on a survey of 101 failed startups, by CB Insights:

Cb insights on startup failures

I will add, though, that a good look at this data reveals mostly what is already common knowledge. Startups fail for lack of market need, running out of cash, team problems, competition, pricing, poor product, and so forth. There’s no surprises there.

By the way, notice that the various causes here add up to a lot more than 100%. That makes sense to me because it’s no hard to really identify causes.

And also, please notice how much of those failures are about failing to do something people need and want. If I add up the totals for no market need, get outcompeted, poor product, ignore customers, and product mistimed, that’s 105%.

The Best-Kept Secrets of Startups

I’m amazed at the quality of questions and answers on Quora. Do you know Quora? If not, you’re missing a really intriguing resource. 

Best kept secrets of startups quora.com

Recently I found this question on Quora: 

What are the best-kept secrets about startups? What are some things that people could benefit from knowing that is largely secret – in the sense that very few people know about it?

There are some great answers there. Furthermore, the voting on answers puts them in exactly the same order I’d put them. The most popular answer has more than 800 votes:

The startup CEOs who get asked to tell their stories have survivorship bias. They get to tell their stories looking backwards and fit a narrative that makes it all make sense and where every move was part of a master plan. I think a much more realistic but less flattering version that most could tell: Our hair was on fire the whole time. We thought we were going out of business until the day we sold. There’s a lot of luck involved. Told anonymously because if you ask me publicly, I’ll tell you the exact opposite of this story.

That’s the best possible answer. And please note the last sentence, which doubles its value. 

And the next highest answers, in order:  

  1. You don’t have to re-invent the wheel to be successful.
  2.  It’s often about choosing a hard enough problem — though not too hard a problem! — and being the “last one standing” when opportunity comes a-knocking.
  3. You don’t have to move to the Bay Area to be successful.

And it goes on from there, with answers very much worth reading. 

Interesting Idea for a Hybrid Crowdfunding Solution

This is interesting: what if some crowdfunding sites limit the investing to so-called “accredited investors” as defined by the SEC. I just read David Rose’s take on this at Quora.

David mentions two sites, his own gust.com and angelist, that already group accredited investors. Up to now they work as platforms for getting investors together to look at deals, submitting deals to investors, and managing communications, research, and so on. But they could also register under the JOBS act, as he suggests: 

… fully registered Broker/Dealers and actively facilitate financings for a percentage of the raise.

Why not? No good reason why not. 

Why? The JOBS act loosened restrictions on who is allowed to invest in startups, and it is now waiting for regulations to make it real. In the meantime, though, there are hundreds of thousands of accredited angel investors. Using the change coming in crowdfunding but starting with accredited investors could get somebody started quickly, without (in theory at least) violating the existing regulations.