Why Startups Fail, According to Their Founders

When the founder of a startup company shuts down her or his business, it is customary to pen an essay that tells the rest of the community what went wrong, called a failure post-mortem. It’s estimated that nine out of 10 startups fail, which is why the technique has become so common as to be a Silicon Valley cliché. Some of these essays are honest, enlightening, and brave. Others point fingers or issue backward non-apologies. Medium, the publishing platform co-founded by Twitter co-founder Evan Williams, is the preferred medium.

The proliferation of the failure post-mortem has helped create a bizarre cult of failure that seems wrong-headed. Celebrating failure (“Fail fast” goes the mantra) seems to let people off the hook for bad behavior. Upon closer inspection, it seems less misguided than necessary. Starting a high-growth business is a roller coaster. Founder-CEOs feel pressure to keep up the facade of success, even when things are actually falling apart behind the scenes. Only recently, after the tragic suicide of Jody Sherman, CEO of a startup called Ecomom, did the technology community begin to publicly acknowledge the problems with its “entrepreneur as hero” narrative. Publicly admitting to failure, and examining it, can take guts. It also distills the narrative to a case study from which other entrepreneurs can learn.

CB Insights recently parsed 101 post-mortem essays by startup founders to pinpoint the reasons they believe their company failed. The company crunched the numbers to reveal that the number-one reason for failure, cited by 42% of polled startups, is the lack of a market need for their product.

That should be self-evident. If no one wants your product, your company isn’t going to succeed. But many startups build things people don’t want with the irrational hope that they’ll convince them otherwise.

The most prominent modern example of this phenomenon is the mobile phone. People dismissed it as a novelty in its early days. Obviously, they are no longer a novelty. The late Apple co-founder Steve Jobs famously said, “A lot of times, people don’t know what they want until you show it to them.” The problem is that entrepreneurs have taken that to heart. For every $19 billion company like Uber, the private transportation service, there are all manner of frivolous products that never evolve past the phase.

There are more practical concerns. Polled founders also cited a lack of sufficient capital (29%), the assembly of the wrong team for the project (23%), and superior competition (19%) as top reasons for failure.

The self-assessment lines up, for the most part, with what industry experts have said. Paul Graham, a partner at the Y Combinator startup accelerator, wrote in 2007 that startups usually die because they run out of money or a founder leaves.

Steve Hogan, who runs a startup turn-around shop called Tech-Rx, says companies with founded by one person—that is, no partners—are most likely to fail. He ranks product demand, or a lack thereof, second. The existence of a co-founder helps avoid many of the reasons cited at the bottom of the CB Insights chart, he says, including disharmony, poor marketing, and the wrong team.

Running out of cash does not cause a startup’s failure, Hogan says—it’s merely a symptom of another issue. Excluding instances of “stupid spending” or the inability to raise capital in the first place, startups tend to run out of cash when a CEO has overlooked all other indicators of failure. “Unfortunately, sometimes it’s the only ‘symptom’ that the leadership sees,” he says.

From Entrepreneur

7 Funny Quotes With Serious Leadership Lessons

Basic Underwater Demolition/SEAL (BUD/S) training was both the best and worst time of my life. It was awful in the sense of pain and suffering, but also a blast (pun intended) because of that pain and suffering. What made the six-month selection course tolerable was having a sense of humor.

Let’s be candid, SEALs tend to have a sick sense of humor. I remember telling and hearing jokes in the middle of gunfights because, as a SEAL, you just don’t pass up the opportunity to tell a good joke (and if you can do it at your buddy’s expense, even better).

So, here are seven funny quotes that every entrepreneur should know, and their leadership implications:

A day without sunshine is like, you know, night. -- Steve Martin

Stating the obvious is painful if you’re on the receiving end. However, the deeper rooted issue in playing Captain Obvious is that there is a disconnect between what you expect people to know and what they actually do. In other words, a gap in knowledge sharing exists. Otherwise, you wouldn’t have had to put on the captain’s hat.

Solution: Share what you know with others such that your people are on the same page as you. Doing so will free up your time because they won’t have to be told anything -- they’ll just do.

My fake plants died because I did not pretend to water them. -- Mitch Hedberg

Being authentic means adhering to your own values and beliefs and is crucial for leadership, but it is not leadership itself. It’s easy to preach authenticity while being anything but.

Authentic leaders modify their behavior to respond to the needs of their followers and the situation while remaining true to who they are. They produce results and meaning by being crystal clear on their unique differences.

Behind every great man is a woman rolling her eyes. -- Jim Carrey

Arrogance ain’t cool. In fact, an overbearing ego is probably the quickest way to turn outside interest away from you and towards something more fascinating, such as watching traffic. The most effective leaders are those who learn to self-manage and be open to feedback, hear others’ ideas and embrace the idea that maybe -- just maybe -- there actually are smarter people in the universe.

Those people who think they know everything are a great annoyance to those of us who do. -- Isaac Asimov

There’s a fine line between confidence and conceit and indecision and exploration. Knowing your boundaries is paramount to leading effectively. Overconfidence can lead to complacency if one’s arrogance gets the better of him, and indecision can be masked as an “exploratory phase” to avoid appearing weak in others’ eyes.

Strong leaders know when to “slow roll” and when to defer to the experts.

Do not take life too seriously. You will never get out of it alive. -- Elbert Hubbard

When stress builds and you’re at wit’s end, just remember one thing: it can always be worse. Always. It pays to have a sense of humor for two reasons. First, it tells other people that you’re somebody who doesn’t get flustered under pressure. Second, when you look for the humor, you create emotional anchors to those stressful situations.

An anchor is an emotional imprint spurred by memory that puts you in a happy (or bad) mental place. If you can anchor yourself to humor in times of havoc, your brain will begin to associate stress with positivity rather than trepidation.

I believe that if life gives you lemons, you should make lemonade ... And try to find somebody whose life has given them vodka, and have a party. -- Ron White

Successful entrepreneurs go above and beyond in everything they do. They know that without the right skill and will to achieve their goals, there won’t be any “extra” in their “ordinary.”

Always remember that you are absolutely unique. Just like everyone else. -- Margaret Mead

At the end of the day, just remember one thing: you’re never too good to take out the garbage.

Having a laser-like focus towards earning a profit coupled with a steadfast will to win are only as good as the purpose that drives them -- and driving gets old. Humor helps to keep things fresh and recharge the entrepreneurial batteries to keep you on the road to business domination.

From Entrepreneur

3 Customers to Avoid Whenever Possible

Some customers just aren't worth the time and effort. Here's how to spot the customers who are worth avoiding.

Most of the time, customers are (obviously) a good thing to have, even though some can be difficult. However, there are three types of customers who are always more bother than they're worth:

1. Leeches

Leeches "pick your brains" and let you help them design a solution, and then go out and hire somebody else. In some cases, the competitor can undercut your price because you've already done the legwork for free!

For example, I was once asked by a fairly well-known market research firm to define and propose a series of quarterly reports that would cover the IT services business. I scoped out the entire project, identified information sources, built a list of potential customers for the reports, and created both an outline and a sample report.

Once I'd done all the heavy lifting (costing me around $5,000 of my time), the firm gave the contract to another writer who would do the work on the cheap.

How to spot them: When a prospect asks you to do work for which you would normally charge, demand a quid pro quo. In the above example, for instance, I should have extracted a promise of partial payment if the firm launched the service without my participation. If the customer balks, then it's probably looking for (your) free labor.

2. Players

Players are customers who use you as a straw man to manipulate the vendor from whom they're planning to purchase. They ask you to bid on an opportunity with the promise that the lowest bid will get the business.

In fact, the customer has already decided to hire a particular vendor (for reasons that don't have to do with price), but wants a low bid from you in order to extract price concessions from that vendor.

For example, I was once on a proposal team that was bidding on a massive upgrade to a Fortune 500 company's IT systems. While our proposed solution cost about half as much as the solution IBM was proposing, we found out later that we were never in serious consideration. The customer was going to go with IBM no matter what, but it was able to use our proposal to extract a 10 percent discount from IBM.

How to spot them: Find out which competitors are already talking to that customer and who inside the customer account is sponsoring them or allied with them. If a competitor seems well-entrenched, make a clear decision whether you've got a real chance of winning an uphill battle. Note: Don't get hypnotized by the big money on the table (because it's not really on the table).

3. Exploders

Exploders are customers who attempt to bully you, berate you in public, or otherwise act in an unprofessional manner.

I once got an email from a reader who had a customer who started screaming about some problem that he'd had with her company's product. When she retreated from his office, he followed her all the way to the elevator, still yelling at her.

The problem with exploders is that, if you continue to work with them, you waste mental and emotion energy on their behavior, rather than on selling. Worst case, you entirely lose the desire to help the customer because the customer keeps acting like a jackass.

How to spot them: Exploders don't just explode when you're around; they explode in front of their employees, too. If you sense that everyone at a customer site is walking on eggshells, you're probably dealing with an exploder. Unless you're very thick-skinned, you'll be more effective, and sell more, if you focus your sales attention elsewhere.

From Inc. Magazine

6 Things Entrepreneurs Wish Family, Friends and Employees Understood

Entrepreneurs often feel misunderstood and with good reason. If people around them acknowledge the following six points, everyone can benefit.

I started my first company when I was 25.  I was a reluctant entrepreneur. My sales abilities outgrew three companies, and I couldn't seem to manage the politics necessary to get where I wanted to go at the speed I wanted to get there. So I took a deep breath, opened a company in 1989, and never looked back.

But in my journey of building four businesses and making the Inc. 500 list, I often found I saw the world differently then many in my circle. I would struggle with communication and empathy, as would the people around me. My family and my friends would never quite understand why I took action with such passion and drive. Though they would be continuously fascinated how I could make things happen from what seemed like unrelated connections and events.

Employees appreciated my drive, but still considered me a puzzlement. They couldn't imagine taking the risks and responsibility of building a company, and I couldn't imagine not having control of my own destiny.  I have spent decades in the close company of more than 1000 entrepreneurs in public session like Inc. conferences and in private forums like theEntrepreneur's Organization (EO). I have come to learn that we have similar ways of viewing the world and creating lifestyles. It's not for everyone, but it works for us.

If you are an entrepreneur, you need to articulate the six concepts below so the people in close proximity can comprehend your behavior. And for those of you engaged with an entrepreneur, I hope the tips below shed some light and give you some guidance to enjoy the ride.

1. Entrepreneurs are benevolent narcissists. There is no question that many entrepreneurs act as though they are the center of the universe. Once I get a vision in my head, it stays at the forefront of my mind until I either eliminate it or execute on it. Over time, I have learned that in order to make visions come true, I must constantly sell and recruit people to my mission. That means talking about my ideas and actions... a lot. So yes, my world revolves around my vision and ambition. That is the narcissistic part.

But unlike most self-centered people, most successful entrepreneurs aren't in it just for themselves. They love to bring other people along for the ride. Making others happy, wealthy and successful drives entrepreneurs. They create companies to benefit society with their products and services. They may interpret that benefit differently than most people, but few are motivated by pure exploitation.

Tip: The next time you feel ignored by an entrepreneur, ask them how you can get involved and benefit from their activities. You may be surprised at the opportunity that opens up.

2. Entrepreneurs evaluate risk differently. The term risk-taker is often associated with entrepreneurs. Most entrepreneurs don't believe they are taking risks by opening businesses and growing companies. Gone are the days of institutions that provide steady employment and guaranteed retirement. I personally lost everything in the 2008 collapse of the banking industry. But I have many friends who spent 30 years as employees in that field and also went through great hardship. I was able to rebuild by taking advantage of opportunity and being agile while many of them are still trying to reconstruct their lives.

Entrepreneurs know the only safety net they can bank on is their own ability to leverage knowledge, resources and relationships to build something from nothing. They believe there is greater risk in being boxed in to a structure than to venture out to new horizons. That all being said, many of us have learned to overcome our material desires and put a little away for those rainy days.

Tip: Don't assume that actions taken by entrepreneurs are careless or not well considered. If you have concern, ask about the process or diligence. You might be surprised what you learn.

3.  Once entrepreneurs decide to take action, they commit. There is an incorrect assumption about most entrepreneurs that they are impulsive. The image of people ideating all over the place and randomly straying from project to project is one that is constantly portrayed in media and is most often a mischaracterization. Most of my successful entrepreneurial friends are actually quite disciplined and focused. They have learned to create structure where there is none. They have a set process for evaluating opportunities and are wary about taking on a new project without vetting it carefully.

But once the due diligence is done and action is required seasoned entrepreneurs will commit all necessary time and resources to making the dream a reality. They have no tolerance for doing things halfway. The project may fail, but the entrepreneur will only be satisfied if it does on its own merits. Then it's time to learn and move on to the next entrepreneurial venture.

Tip: Entrepreneurs in motion are a force of nature. Either get out of the way or support the activity whole-heartedly. Dipping your toe into their projects will only create static and dissatisfaction for everyone involved.

4. Entrepreneurs feel angst about time. There are very few new ideas out there. Hardly anything comes up today that hasn't shown up in a science fiction novel or movie from decades ago. The innovation comes from ways to execute those ideas in a manner that can support the market and a profitable business model. For every entrepreneur attempting to find that perfect path to success, there are many competitors nipping at their heels. Some have smarter people, more money or better partners. Some have all of the above. But that's the game. And to the victor goes the spoils.

Once I complete a vision in my head, it's a race against time to see if that dream becomes a reality. The more complexity involved with the vision, the more challenging time becomes as a factor for success. This is where I use my creativity every day, to figure out how to get from point A to Point B the fastest way possible without sacrificing stability or harming anyone along the way. Executing on my need for speed sometimes results in my being less polite, considerate or reverent than people expect. It's not that I don't care. It's that sometimes I am moving so fast I forget to show it.

Tip: Give entrepreneurs the benefit of the doubt when expecting niceties. You don't need to put up with rudeness, but you can gently remind them that not everyone moves at their pace and others need consideration to feel respected.

5. Every day with positive cash flow is a good day. I remember a few years back being at EO event in Hong Kong at the end of the month. My wife at the time and I were laughing because all around the hotel you could hear the same stressed mobile phone conversations going on about whether or not the attendees had made their payroll obligations for the month. Growing a company requires resources, especially cash, and most entrepreneurs will stretch those limits to make progress quickly in the marketplace.

The lack of resources to battle the competition is usually the number 1 stress point for an entrepreneur. The most painful days in my life have been when I could not meet my financial obligations. Those are the days I feel guilty and inadequate. Those are the days I feel the pain of those who depend upon me. As an entrepreneur I understand that family, partners and employees put their trust in me to help them achieve financial stability. I understand that they do not choose my life because they don't want to risk instability. As long as there is money in the bank to continue the path forward, every other challenge is minor.

Tip: Don't assume entrepreneurs are primarily motivated by greed. Certainly they enjoy the rewards that come with success, but they are driven to achieve the security that comes with strong liquidity and cash flow.

6. For entrepreneurs, working means fun and relaxation. Contrary to popular belief, most entrepreneurs are not workaholics. I describe work as the things we have to do in order to do the things we want to do. Some people like to play sports or dance or do woodcraft as a hobby. Entrepreneurs love to build businesses. We get excited about opportunity,  networking and product development. When I sit at a Yankees game, I amuse myself by calculating the per-attendee revenue and cost of services to figure out how much money is being made. When I run a 5K or kayak, my brain lets loose with creative ideas that can either improve my business or create something new from the resources I have.

I feel blessed that the things I love to do are also the things that make money and give me a sense of accomplishment. When I need to rest my brain and body, I do so. But very soon, I go back to doing what I love because I enjoy it and it makes me happy.

Tip: No need to ever tell an entrepreneur to slow down or take time off. It's like trying to teach a pig to sing. It just wastes your time and annoys the pig.

From Inc. Magazine

How to Deal With Self-Doubt

I woke up feeling a little strange this morning. It’s not the first time, but it’s usually associated with having a little too much fun the night before. Sadly, that was not the case. So I did what I usually do – ignored it and hoped it would go away. It didn’t.

As I sat down to work, it was still there, like a cloud inside my head. So I sat quietly and tried to listen to whatever it was that was bugging me. After a while the fog started to coalesce into beads of thought – concern over a project I’m working on. But there was something else, so I dug deeper.

Finally, there it was. A feeling. Fear. And the fear had a name. Self-doubt.

Not to sound melodramatic, but the truth is it’s been a long time since I felt that way. Fear I’m used to. Every time I pick up a chainsaw to drop a 60- or 70-foot tree that can end my life in an instant, I feel fear. Then there was that nasty unidentified infection a few months back. That was a bit scary.

But it’s been a very long time since I felt any kind of self-doubt. After all, I’ve been around for ages. I’m more or less a veteran at the work I do. And back when I was a senior executive in the tech industry, there was simply no time or place for self-doubt.

Don’t get me wrong. There was no shortage of unknowns, tradeoffs and risks. But you made the best call you could and went with it; let the chips fall as they may. That’s how you run a big company. You strategize, capitalize and turn the crank. If it works, you keep doing it. If not, you come up with a different plan.

But when it’s your own business, when you’re committed to doing something you’ve never done before – challenging your own comfort zone and taking risks with your family’s money and the one and only reputation you worked decades to build – that’s a whole different story.

When you’re all alone in your own little office without the hustle and bustle of a crowded workplace, there’s nowhere to hide from self-doubt. And that can be a little scary. So how did I deal with it? How should you deal with your own self-doubt?

The worst thing you can do is give in to the powerful urge to distract yourself. Don’t pick up your phone, write a blog post, read an inspirational quote or get on Twitter to see how many new followers you have. Self-doubt is important. It's not something you want to sweep under the rug. You want to pay attention and see where it takes you.  

Just sit quietly or go for a walk and ask yourself three very pointed questions”

1. Are my goals true?

We do everything for a reason. Our goals are what drive us to challenge our own status quo and risk failure. If it’s something you know you have to do or really want to do, then that’s one aspect of doubt you can put to rest. If not, you probably have some more thinking to do.

2. Am I capable?

Only you know if you’re capable of accomplishing what you set out to do. If you believe you are, then you should be reasonably confident. Some doubt is normal. Some people use coaches, family members or close friends for this sort of thing, but they’re really just reinforcing what, deep down, they already know.

3. What’s the worst that can happen?

Usually the downside risk isn’t as bad as we make it out to be in our heads. If you’re driven to go for it and you’re not risking something critical you can never get back – like financial security or your health – it’s probably OK to throw caution to the wind, especially if you’re particularly risk averse.

The insights you’ll gain by answering those questions will help determine if you’re on the right path or perhaps need pivot or change direction. As you can see, this isn’t rocket science. As long as you’re honest with yourself and deal with it head-on, there’s nothing to fear from self-doubt. It’s actually a good mechanism for keeping you on the right track.

From Entrepreneur   

This Is How Much Money the Average Entrepreneur Starts With (Infographic)

For most new businesses, getting started means learning how to make do with less.

The majority of entrepreneurs set out to create a company with $10,000 or less. That's according to a recent Intuit survey of 500 small businesses across the country. The survey results also revealed that three quarters of those business owners relied on their own savings to get started. Meanwhile, most of them didn't initially feel like they had enough financial know how to use that money smartly.

Sixty-eight percent said that, looking back on their first year in business, they wish they'd spent more time learning about financial management.

Don't want to make the same mistake? Check out the inforgraphic below from Column Fiveand Intuit for more insights on how U.S. small businesses get started--and how to be smart with your startup capital.

From Inc. Magazine

When You Change, the World Around You Changes

What differentiates the rare few who create an extraordinary life for themselves.

"Give me a lever long enough, and a prop strong enough. I can single-handedly move the world"--Archimedes

Oftentimes, the difference in people's lives is the difference in the standards to which they hold themselves accountable. As Newton's Third Law of Motion dictates: "For every action, there is an equal and opposite reaction." It's that obvious and, equally, that simple, albeit often requiring a Herculean effort to achieve Herculean results.

People who achieve the unachievable are, by definition, naturally unreasonable. It seems as though they make the conscious decision to replace their desires with unreasonable needs. Everything they partake in seemingly requires relentless determination, intensity, and a consistent element of risk to make sure they are constantly operating at a peak performance mode. A quest for a life of uncertainty, combined with a positive belief system, is what they excitedly wake up for each day. A "seize the day" mentality, versus "Oh crap, it's morning already."

In one sentence--the only thing that creates an extraordinary life is an extraordinary mindset. People who have that mindset often are viewed as a little "out-of-balance" by many in their lives.

What differentiates the top 1 percent of the population from the remaining 99 percent is the simple dichotomy of thought process. Those who choose mediocrity do so due to lack of self-belief, or simply a lack of desire to even begin to contemplate their end goals.

One of the most powerful traits of the 1 percent is their acute ability to seek opportunities in and out of every negative situation.

"I took the road less traveled by and that has made all the difference"--Robert Frost

Most people think this poem is about taking the underutilized road. However, if you read the poem, in-depth, the chosen road is moot. It is entirely about the choice of making that first step on whichever road you choose.

Master the trait of taking the first step, and anything is possible. Unreasonable people dominate their future by taking calculated risks and reveling in their own moxie. They live up to their own hype and believe their own vision. They must--otherwise, who will? In short, unreasonableness is defined by taking steps nobody else bothers taking.

Change is not a question of ability; it is a question of will.

The "out-of-balance" people who take the road less traveled are those who simply make a cognitive decision and then execute with little caution.

The more you demand out of yourself and the world you wish to create, the higher your standards become. The rare few who have a clear, compelling, avid understanding about why will inevitably make their move and leave the rest behind.

"He who has a why to live for can bear almost any how"--Friedrich Nietzsche

Those who succeed have a laser focus on their end goals. Our mind reacts to images, snapshots, and short films that we create and file in our memory bank. When envisaging the end goal, those of us with total determination have a tendency to magnify this image, add vibrant color and even animation. Those who never commit are focused solely on the anticipated turbulence of their journey.

Our animated mental pictures "salivate" our soul. The soul is only "satisfied" once the end result is achieved. Thirst … quenched!

"Where success is concerned, people are not measured in inches, pounds, or college degrees, or family background; they are measured by the size of their thinking."--David Schwartz

To ultimately bridge the gap between today and your desired future, you must focus on what you want versus what you don't want.

Imagine for a moment that all the turbulence, uncertainty, and risk paid off, and now your life becomes a smash hit? Soak in that feeling when doubt creeps in. In fact, revel in it.

Many of those in power will agree that their biggest fear is ultimately themselves. Being aware of one's extensive capabilities and unlimited potential can be daunting. Realizing that if they do not take full advantage of these abilities, they will inevitably become a victim of their own demise.

The best way to avoid realizing this fear is to simply take action. Energy flows where attention goes. Therefore, when doubt slips in, change your mindset, get up, get out, and do something!

When you change, the world around you changes.

From Inc. Magazine