Startups fail due to two key reasons: focusing on the solution rather than the problem, and avoiding the wrong problem. Successful founders avoid these mistakes, separating billion-dollar companies from failures.
An investor has the unique opportunity to work with and mentor hundreds of entrepreneurs and executives. They have seen behind the scenes of both successful startups and those that didn't make it. Despite the hindsight reasons that a startup may give, there are only two reasons why all startups fail: falling in love with solutions and not problems, and not moving fast.
One example of falling in love with a solution is Stuart Butterfield, who built the game "Game Never Ending" in 2002. After failing to get any meaningful traction, Butterfield saw lots of engagement with the game's photo upload and share feature. The solution for that specific problem became Flickr, which was purchased by Yahoo for over $20 million. However, Butterfield was in love with building a game that was the solution, so he tried again with a new game called "Glitch."
Glitch was designed to allow gamers to collaborate and build a digital world together over time. While building Glitch, Butterfield and his team encountered a problem that is pretty common to many startup teams: efficient communication. They decided to build an internal communication tool to solve their own problem, and when Glitch failed, they had a lightbulb moment and thought maybe other teams had this problem. They shared an early version of this internal communication tool with friends and colleagues and launched an internal community communication tool called "Slack," which was acquired in 2020 for over 27 billion.
Focus on the problem is the creative ability to solve problems. Diane Halper, the professor of psychology at the Manure Schools at KGI, says that problem-solving is the cognitive use of skills or strategies that increase the probability of a desirable outcome. In layman's terms, learn as much as you can to make an informed decision, then test your hypothesis and settle on the best possible result starting with solutions.
Startups often fail due to speed. A mentored founder named Captain successfully tested the waters and shipped like a full-time job. Brian, CEO of a startup that helps developers and teams share open-source project value, moved fast, ideated, ran experiments, and made decisions that confirmed their ability to solve urgent problems.
Bottom Line, to reduce the startup failure rate, we must focus on two things: first, continually ask what the problem is, and second, move fast in everything we do to mitigate or eliminate that problem. This method doesn't fail, and entrepreneurs should strive to be fast-moving problem solvers.
About the Writer
Jenny, the tech wiz behind Jenny's Online Blog, loves diving deep into the latest technology trends, uncovering hidden gems in the gaming world, and analyzing the newest movies. When she's not glued to her screen, you might find her tinkering with gadgets or obsessing over the latest sci-fi release.What do you think of this blog? Write down at the COMMENT section below.
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