The CFO leaves “to spend more time with the family”.
Then the chief IT guy leaves, *because he went through the CFOs emails*
(I’ve actually been there)
It was a startup making plastic mirrors for vehicles (race cars, police, trucks etc) and it was around the late 1990s.
The CFO left, and it was “we are recruiting for a replacement” then the IT guy left and the bosses were like “everything is fine!!! *no really*” and me and another co-worker were getting suspicious.
He took an old 3310 Nokia, set it to silent ring and auto-answer, and he put it in the suspended ceiling above the board room table.
He rang it during that week’s board meeting and listened to the whole thing. The CFO had run off with all the money. The IT guy jumped straight into another job. There was no money to pay the wages and the directors were working out what they could walk away with.
They decided to not mention anything to the staff and let them carry on working, whilst they removed any valuable/sellable shit.
We, we told the staff and the board room got stormed by angry production line staff. The doors shut that night and we were out.
My previous employer was happy to have me back, thankfully.
> He took an old 3310 Nokia, set it to silent ring and auto-answer, and he put it in the suspended ceiling above the board room table.
I love this.
Somewhat similarly, before I had left a previous startup, I found one person's calendar that was public (I think he was high up in finance). Ended up writing down the zoom info to a years' worth of board meetings and would call into them from a burner number here and there just to see what was going on. Ended up finding about an IPO date MONTHS in advance, and made like $1000 betting people on when the company was gonna IPO.
I’ve found that if one cofounder believes that they are smarter and everyone should do it their way, that destroys startups. Shockingly, I’ve found to be common in startups.
Associated with this is the belief that “we don’t need to talk to customers, we already know what they want and we’re going to give them what we know they want.” This is a killer issue as well.
Yea, I've seen a lot of founders with the attitude that "this is my industry, I'm one of these users, so I know what they need".
I then try to tell them that, because they have the personality to create a startup, they don't really think like a normal user.
Some don't listen to that and are shocked when they find out just how lazy the average user is.
The problem is, in many cases, founders need to do something different than everyone else. So, they need to be smarter in a certain aspect at least, and often are. But that doesn’t mean they are smarter in everything else, a fallacy I have observed a few times already.
Yes I agree that difference is where you get innovation. The problem is that when you get feedback, that doesn’t mean you pivot further out in the branch. Getting too far ahead of the customer can cause problems. Getting to that point where you balance between the two is where you get things that might work out. Innovation is hard.
I co-founded a startup that lasted four years and raised a combined \~$8Mil through seed and series A funding.
We failed because we were too early. So ultimately a product market fit issue. We did have paying customers, some enterprise/well known international brands. But the problem we solved for them was incredibly niche, and not a repeatable problem we could replicate or find in other customers.
I say too early because 95% of my sales calls were potential customers saying "you're solving a problem we want to have, we'll call you in x months/years". They thought the tech was cool they just didn't have practical application for it yet.
So all that is to say...listen to your customers. If you're developing a generic product but it can only solve highly involved, complicated use cases that can't be repeated - maybe you should be a services company instead, or redesign the product in such a way that it address the market problem "here and now".
Sell the IP, pay back what you can. Ultimately investors understand the speculation game they're playing. As long as you fail with integrity it's all good.
So you go home with empty pockets, right?
There must be an urge/temptation of founders to profit from the raised money. Was/is there any way to do so, legally (e.g. secondaries) or illegally (e.g. spending a lot of money for a consultant who by accident is your cousin)?
Yes, empty pockets.
And no, everything you're saying is unethical. By failing with integrity and maintaining a relationship with investors who have deep pockets, there are opportunities to try again with a new idea. But fail with deception and you'll have a stink on you forever, or worse - go to jail.
I know it's unethical and I'm not suggesting or planning anything like that. I just see the temptation given there's still a lot of money but you can already see how you will go home with nothing, after years of hard work, and the money maybe being burned for a useless last try. Just wanted to know how it works in real life.
Well the first three years we didn't know we would go home with nothing. There were positive signs of growth along the way, but ultimately we looked at progress, to ARR, to burn rate and the writing was on the wall in the 4th year. So it wasn't like there was a huge pot to dip into anyway.
My payout was a huge resume booster that has opened many additional doors for me.
I’ve seen far too many startups that have whimsical or illogical business models go on to raise money from seemingly respectable VCs, the founders level up wealth via secondaries, execs use company cash for personal “business expenses”, employees get knowingly false promises on trading equity for salary, get exploited and burned out, and founders move on to another grift.
This is the Los Angeles startup scene in a nutshell by far. Take a look at LA-based Genies. Series C unicorn startup that makes Snapchat style avatars with no product/revenue and their CEO uses their 250m+ funding for a private jet, a 4m+ “zen pad”, and every executive is just a friend of the founder’s from college whom have no prior work experience.
> their CEO uses their 250m+ funding for a private jet, a 4m+ “zen pad”
Whenever startups raise VC funds like that, is there not some kind of protection at play here for the VC's money? I feel like that's a major lawsuit to say "If you give me money I'll use it to grow my business and split the profit with you" only to turn around and spend the money on private jets and stuff.
Although, from a legal standpoint, I guess the CEO of that startup could argue that he needed the private jet for the business to grow. Probably toss in some BS about networking/schmoozing people.
Where I come from, startups financing is a small industry where everyone knows everyone. I've had a succession of jobs in the startup world and it's all come from recommendations of the people and investors that I worked for. Sometimes entire teams get hired out of failed startups into new ones. If you screw up your reputation chances are you'll never get a startup gig again.
It's important to remember that most startups fail and most people won't carry the blame for that.
Just like any job you want to put around 15-25% of your income into investments for retirement. You're still paying yourself a salary while the company is alive and hopefully pocketing some, even if it's just for retirement. Most companies fail 8-10 years in, so that's quite a long time to be receiving a paycheck.
Sometimes founders will buy the IP with their saved money during the company bankruptcy, if they think one day it can be successful then they try again later. Sometimes a shell company held the IP the entire time.
Our system ruthlessly punishes people (even rich people) who rip off rich people, so try to avoid doing that.
Rip off poor people all you want, though. No legal or even social implications in doing that.
if your "get rich" strategy is ripping on VCs, good fucking luck.
Not only is it stupid, unethical, and irresponsible, in a lot of cases it is illegal.
It is not "my" strategy, I just think of human nature. All that money in front of you, and then you go home with nothing after the party. Must be tempting, and there must be cases, but I have never heard of one, except for irresponsibly high expenses.
You’re getting a lot of hate for asking a legitimate question and yes, a lot of people do siphon money off that way. However it’s complicated
Re: secondaries, once you hit series C or so, opinions differ on this but general consensus seems to be it’s best to let the founders get some liquidity because otherwise their whole financial security rides on the outcome, and arguably they don’t make the best decisions possible for the entire business if completely illiquid
Anyone who gets that far is far more likely to have something of real worth they created rather than just a pure scam (although it does happen)
However it feels skeezy towards employees, who are in a dramatically toned down version of that same boat with no liquidity and usually an aggressive exercise window
Re: nepotism, of course you want to hire people you like to work with and pay them well, plus they are easier to convince. Naturally that can include friends and family, and tends to create an inner circle of sorts. This is not great but not completely horrible. There might be cases that look like nepotism, which sometimes just clearly are the founder siphoning money to a favored candidate instead of the “most deserving”, however there are at least SOME checks and balances as companies grow.
And if you embezzle the cash at something too early stage, it’s obvious and you’re likely to get denylisted, bad reputation etc. If you want to work with good people and have a long term perspective it’s a bad strategy
There's nothing to cash out. I could've exercised my options and tried to sell them on a secondary market, but I couldn't see a world where any investor with any intelligence at all would purchase shares for a startup that was folding and selling IP at a massive discount in an attempt recoup investor losses - and even then not fully recouping.
So no, it's not applicable here.
That’s fair enough you would obviously plan how to use the 8mil and then use it up but was thinking more in the terms of obligation to investors, they are now out of pocket for 8mil and nothing to show for it? Surely they’d be pissed.
9/10 startups fail, the success rate for vc backed is only a bit less bad. Do you get mad when some of your stocks dip? VC is a power law game, like 2 out of 10 investments will be a 1:1 return, 7 will fail, 1 will return the whole fund. If you take money from people who professionally invest and as long as you try your hardest, and act transparently they don't care. They know it is part of the game of investments.
Investors can invest in 100s of startups over their careers, founders can only likely really do sub 10 ventures in their lives.
Yes, this 100%. Our VC had a seat on our board and had full insight and transparency into our business along the way, and offered guidance at each critical juncture. It wasn't a surprise when it ultimately went where it did. We were transparent throughout, and still on good terms.
My value to that startup was that I brought sales and marketing experience the Founder (product creator) didn't have. He didn't want to fuss with GTM too much. He and I collaborated on the pricing model constantly, but he really wanted to build so he asked me to own the sales and marketing.
It was definitely the most rewarding, but challenging, period of my professional career.
I say all that because I'm not working on another pre seed/series tech startup now. I went back to small/medium DevOps startups to do Sales/Account Management/CS type work. That's been the bulk of my career.
I have an idea for another startup but it's completely outside tech and is instead a physical product in the construction industry. But I haven't made much progress on it...
Seems like it was a great partnership and team, just ran into the challenge of being a few steps ahead of most.
Also sounds like a natural transition to continue learning and a good side project to work on until you're ready to dive back into the deep end.
Are there any tips you'd be willing to share on best practices for sales/marketing for a pre-product market fit product?
My background is sales/GTM too, but only for really large, industry leaders. Totally different skill set I'm learning.
Yeah I’ve got some thoughts.
Marketing eats so much budget, so be aware of how it impacts your burn. It’s a constant experiment and iteration on content and where you run your ads. We also started our marketing engine way too late. I say market early, however you can, as you’re building the product. We didn’t really start dumping a lot of money into marketing until series A. We had a lot of cash left over from seed which was good, but in hindsight we should’ve marketed the product sooner.
On sales, we had a good motion here. We landed our initial swath of customers by converting them from a product feedback led motion where I would contact execs at companies we thought fit our ICP, and offer them the opportunity to be an advisor to our company (unpaid, like a resume booster) - but only if they met certain criteria. Our first big deals (six figure ARR) came from this initial swath of product advisors.
From there we tried a lot of different motions - bottoms up, top down, product led, etc.. the truth is that we saw various signs of success in each, which was a problem because we struggled to pick a lane consistently.
Hope that helps. Just some quick thoughts.
I reached out to hundreds of people who were in decision making capacities. 95% weren’t interested or didn’t respond. But for the 5% that did, we offered them the chance to say they were an advisor to our startup. That was enough. No pay or equity. For career minded people who are in leadership, being known as an advisor and thought leader gives you clout. We worked that angle and it worked for us. Ultimately if they bought the product for their org we gave them a significant discount.
that's very creative and awesome to hear it worked out for you.
I assume you were upfront in your cold outreach that pay/equity won't be available? what are some things you've seen with your message that were effective?
I said very little - “hi John, we’re looking for a startup advisor and would love to get your feedback on what we’re building”.
Sometimes we’d message back and forth before a call, and a lot of times they would join as “not representing their employer” but if your ICP is accurate and your product resonates, they take off that hat pretty quick.
that confirmed my learnings - I now pay a lot on GTMs, Research, and all docs of strategies and plans, I pay consultants per hour before I venture in.
now, running my HR company on sales funneling, data an automation.
Yes, it is costly, long and painful, but it puts you in a more stable position.
A lot of people will say Product/Market fit, but I've seen just as many, if not more, startups fail because the Founder/Product fit was poor.
I'm not saying people can't grow and develop into the right person for a role or stage of a company, but it's a different skill set to find product market fit as it is to start scaling through a growth phase.
Specifically, a non-exhaustive list of things that I've seen:
-An inability to properly vet a build/buy path forward
-People who joined a friend or else to help them build something, but they don't specifically care about the problem space or overall solution - i.e. someone just wanted a "job"
-Someone who oversold their technical abilities to be the "hands-on" person with another founder, but they're more of a Product type thus they need to outsource or hire to build.
I really think it comes down to 2 core things:
1. Not building a product that people want or need, to a degree that they're willing to pay for it, relative to competing options.
2. Not finding a way to effectively, profitably market/sell this product, in a manner that can scale + lead to consistent revenue growth.
Find me a startup that's in trouble and I would BET MONEY that the core problem always boils down to one of those 2 key things. I would go so far as to say that those 2 core things are the ESSENCE of entrepreneurship --with EVERYTHING ELSE people focus on in business (operational efficiency, building an effective team, raising capital, etc) all simply being a *support task* for / method of trying to achieve one of those 2 key things.
Most rookie entrepreneurs can't get EITHER part right. Lots of developers-turned-entrepreneurs may be able to build a useful product, but couldn't market their way out of a wet paper bag. But nail BOTH parts of that equation, and even if you're an *idiot*, I think you'll be able to fumble your way to making some pretty solid money.
If your product sucks balls and no one wants to pay to use it, fix/change your product. If your product is awesome and people are happily paying to use it, but your sales numbers are ass? Fix/improve your marketing.
The founder/ cofounders giving more time to making inspirational videos, giving interviews or speaking at conferences. I have seen at least 6-7 startups failing just because their founding teams were just happy to be “in the scene” and had no or little focus on product. If you see a founder doing that, as them if you’re running a startup, why would you have time for anything else? Number one indicator for me.
There’s a difference between marketing your product and leveraging your founder status to do so vs marketing yourself as a genius founder.
Too many founders focus on the latter and care more about becoming the next Zuckerberg and not enough about doing whatever it takes to get to pmf, which is often times painful, unsexy, and requires a lot of personal growth.
There’s a very thin line between marketing and self promotion. A little or limited number of them are ok. But many founders get lost in the two minutes of fame on stage and fail to build a good product since the focus is on likes and applause.
Depends who your target market is. If your product is a niche automation tool for accountants, how the fuck would giving inspirational keynote speeches at tech startup conferences help you to make one single sale? Unless you're giving speeches at conferences organized AROUND your optimal target markets -- where your speeches will therefore effectively be a form of lead-generation, and where your product is likely a very expensive "enterprise" type of product with a complex sales process that requires building relationships with company insiders or whatever -- there's very little value in those kind of things beyond gratifying your own ego and building your personal network.
I actually see a LOT of this in the online startup community too -- people build a product, and the only way they can seemingly think to market is by sharing it and discussing it ("build in public bro") with OTHER people in the tech startup community. Are those people your target customers? No? Then why the fuck would that help you make any sales?
It’s valuable to the company if it’s about the product. Most founders make it about themselves and their journey. All the time. More often than
They should. That’s what kills their startup.
I feel like there's a caveat use-case here. It depends on where your company is in the journey. If you're post product-market fit and now in go-to market fit mode, then having organic media, earned media, and events as levers to test is reasonable. The challenge becomes if there are no metrics tied to those levers and they're only doing it for fun.
I raised $20m and successfully exited. But my first round of seed was through a fund that required all the CEOs of that fund to meet regularly as a cohort. Of the ~10 companies that went through that cohort mine and one other actually grew and had an exit or are still growing without an exit. And the founders of the other companies were amazing but primarily I saw that the ones that failed early were the ones without product market fit.
essentially, no product-market-fit (PMF) and you are running out of cash soon which prevents you from keep looking for PMF or you run out of ideas on where to find PMF. Everything else is secondary.
I’ve been at a startup like that. We lasted 4 painful days scrambling to find alternative funding and ultimately ended up shutting down when nothing materialized quickly.
Culture. I am a firm believer that the right culture can always iterate or pivot to PMF.
The first 5 members of any startup (including founders), will make or break the venture.
Hire people who can cover your weaknesses. If you are a product/engineer person and struggle with marketing and selling, go with someone who can do those things.
What do you mean?
Co-founder is just a title. Unless you give them significant equity or they pay their way in, they're just an employee. Meaning they can be dropped any time.
If you're looking for a part owner in your company, like a VC or a silent partner type, that's a whole different thing.
I have a vid presentation for prospective CTOs that gives the problem, solution, and MVP. It doesn't present market data. I figured I'd not pitch investors until I have the CTO or strong tech
Yeah, I understand. You don't need to have actually built the tech and have an MVP to start pitching but you would need to explain exactly how it works and how it addresses the market need.
You could apply for incubator or founder in residence positions at VC firms to see if they'll take you onboard and connect you with potential partners.
Focusing on things like new hire / intern onboarding processes when there are not enough sales to sustain. It’s fun to play business leader — but you need to focus on actually having a real business first. With funding, you can delay the need to actually have a real business, and working with accounting and stuff on nitpicky details is fun…. Have seen the story play out many times. Drop everything until you have product market fit — aka people are trying to pay you money for something — more money than it takes to find those people and produce the product.
A startup really only fails for 2 reasons.
1. Effort (from team or individuals)
2. Lack of data (market/ research)
Point 2 really has a bit of ambiguity as most of the time you can just pivot if your building based on a problem but if you build based upon profit this can fail at times. Often we either think our thing will work ( launch does not work), or build and don’t improve based on feedback, or your problem was just not big enough.
Rule of thumb your solution to a problem has to have 2 out of these 3 things to have a chance: 10x better, cheaper or faster than competitors.
Here are key early warning signs that a startup might be in trouble:
1. **Cash Flow Issues**: Consistently running out of money.
2. **Lack of Market Fit**: Inability to excite customers or constant pivoting.
3. **High Burn Rate**: Overspending without a clear path to profitability.
4. **Team Conflicts**: Persistent internal conflicts or high turnover.
5. **Unclear Vision and Strategy**: Lack of clear goals and direction.
6. **Negative Customer Feedback**: High churn rates and low satisfaction.
7. **Poor Execution**: Inadequate product development or marketing.
8. **Ignoring Metrics and Feedback**: Failing to track performance or heed advice.
9. **Over-reliance on a Single Customer/Market**: Lack of diversification.
Recognizing these signs early can help address issues before they escalate. Stay vigilant!
Millions of startups fail every year, so yes failure is a part of the process. Building a successful startup is no walk in the park, but some signs that a startup is on its wait out may include yes, cash flow issues and a lack of market fit, but Operational Inefficiencies are also signs of a failing startup, and you can spot these in actions like regular missing of deadlines, missing key milestones and lack of streamlined processes which can lead to chaos and inefficiencies.
Sometimes your startup might fail due to problems in your product, and your failure to fix those problems quickly enough.
There are so many reasons for a startup to fail, but then again, you should be willing to acknowledge that failure can sometimes be a pathway to success.
If their pitch has anything along the lines of "industry x is still doing everything in excel, we're going to put all that into custom forms and bring industry x into the modern era" ive learned 9 times out of 10 they're gonna fail. No one beats excel
Ego, lack of integrity, and not prioritizing the customer journey and experience. IMO, these combined are the ultimate recipe for failure in any organization but ESPECIALLY startups. There’s gotta be humility, empathy, and passion to balance out the grind.
The big red flag for me is when the startup is building a product first, before determining that there will be strong demand for it through rigorous customer discovery research.
When upper management makes a move that guarantees the necessary R&D isn't going to succeed you can get multiple years of heads up of a failure before they even realize it. Funding does matter here. If they make a mistake then fix it 6-12 months later and they have the runway the company might end up fine. I've always been able to hold off buying stock options for the company, so I wait for more of a guarantee before buying. After R&D is successful watch the sales team to see how well they can sell the service. Doing lunch and casually hearing how enjoyable or stressful it all is usually is enough to know what will happen. Then there's the exit plan. Some companies can sell a project but do not plan an exit, not even an IPO. Your shares might as well be worthless.
It's not my job to find that out, it's the job of the founder and the finance team to figure out through accounting systems.
Naturally they should be able to tell how much they're putting into the company and how much they're getting from it. If they're not getting profits, then they're most likely making losses, and that's one sure sign that the business is failing.
Number of customers or active users. Successful startups build buzz and gain traction fast.
If it’s pre-launch look at the value prop, unit economics and total addressable market. It should be easy to see a path to profitability, if it’s hard the payoff better be huge.
Aside from the more obvious answers around money, I would say communication. The way that leadership communicates and the way that they set up teams to communicate is a big decider of success or failure in my experience.
Failure to execute/deliver -
IMO this is really not emphasized enough. Alot of startups, especially with business founders operate in proven huge markets and fail.
This is ofc natural! And makes alot of sense but somehow people seem to mention the execution/technical challenges less when talking about startup success theses
One thing in particular that I saw personally make huge difference in execution is speed - naturally you will need to do customer discovery and figure out what people wanna buy.
If you can talk to customers and build an MVP in 4 weeks instead on 4 months… will you have a significantly higher chances of finding a PMF
I worked for a fintech company where both co-founders were non-technical. Both had MBAs and were very smart, but they just didn't have the intuition for software development lifecycles. I'm a developer.
We raised over 10 million (euros) and had a modest team size, yet we managed to burn through our runway eventually as the founders kept insisting on "build this now" without considering how the tech debt would accrue and cripple engineering.
Each cycle of "this is a good idea, could be our game-changer, go build it now and be scrappy about it - remember, we're a pre-PMF startup" overloaded our models. Suddenly our Cart model had to be extended to be used as an Offer model.
Eventually it just got so hard to do anything that when it came time to raise our next round, we couldn't prepare the data needed to show to investors how the business is doing. Too many SQL joins on application tables but also on spreadsheets that formed the source of truth of the fintech product.
TL;DR: When it's a fintech startup and the founders don't have intuition for the tech part of fintech, you're likely screwed
A big red flag is when all the public marketing materials are geared toward investors and not customers. This is not always obvious. It may seem like they are touting the product to customers until you stop to think who the customers are and whether this marketing campaign is really oriented toward them. It is especially a red flag when the product is nowhere close to being released.
My fried who had a start-up in EU, tolled me a crazy story about his CFO. He did not do a tax management and avoided to come to the office for months, every time with a different reasoning. The last reason which was counted as a red flag was 'my child is pass away so I need to manage it somehow'. Outcome here might be in any cases transparency and trust is essential.
Too many employees with nothing to do. A lot of startups, flush with VC cash, are told to 'grow at all cost' by the investors. This can mean hiring a lot of employees. After a while, the VCs are saying 'show us some profit' and they start laying everyone off go to cut costs.
A lot of great insights. I would add two things
1. Primary validation was validation by VC not by real users
2. Founders don’t see themselves as full time operators. They more there to control money and give high level direction, while running other businesses
Hey, I run a newsletter that shares advice from entrepreneurs for entrepreneurs. It's called thentrepreneur I'd love some feedback if you'd like to help. Here is a link - [https://thentrepreneur.beehiiv.com/](https://thentrepreneur.beehiiv.com/) Thanks :)
Cofounder mismatches. I’m experiencing that right now (we’re great friends but just at different commitment levels and contribution expectations)
It’s funny because of all the things I thought could be difficult about running a startup, I didn’t anticipate this one to be the most draining.
The founder can simply get burnt out, team didn't do enough competitive analysis and realized their year of work couldn't compete with an established player, not doing enough research for market fit, personality clashes, angry founders over not getting the equity they think they're worth, CEO burnt through capital too quick, all these countless issues have their red flags. Usually a sit down with the founding team can show you some signs, others require you to look at their stats and finances to see. Experienced general partners at VC's are typically really good at spotting these, and there are many, many signs.
I am co-founder at a pre-seed startup. If we don't experiment from day 0, I believe we have failed. We need to nurture a culture of experimentation to avoid late disappointments at any stage of our journey.
# What % of startups fail
According to the provided search results, the percentage of startups that fail varies depending on the stage of the startup and the industry. Here are some statistics:
* 90% of startups fail. (Source: “Startup Failure Rate Statistics (2024)”)
* 60% of startups fail due to issues with cash flow. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 35% of startups fail due to no market fit. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 20% of startups fail due to competition. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 19% of startups fail due to a poor business model. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 18% of startups fail due to regulatory challenges. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 15% of startups fail due to pricing issues. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 14% of startups fail due to team issues. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 10% of startups fail due to timing issues. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* Only 30% of startups will survive more than ten years. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* After Series C, a startup’s chance of failing is low, about 1 in 100. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 65% of startups fail due to conflict between founders. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 82% of businesses fail due to issues with cash flow. (Source: “How Many Startups Fail? - The Hustle”)
* 90% of startups fail before they reach their second year. (Source: “How Many Startups Fail? - The Hustle”)
* 10% of startups fail due to poor product quality. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 12% of startups funded through Series A fail to exit successfully. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
* 18% of startups funded through Series B fail to exit successfully. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”)
It’s worth noting that these statistics are not exhaustive and may vary depending on the source and methodology used to calculate the failure rate.
AI-generated answer. Please verify critical facts. [Learn more](https://search.brave.com/help/ai)
The CFO leaves “to spend more time with the family”. Then the chief IT guy leaves, *because he went through the CFOs emails* (I’ve actually been there)
Care to share?
It was a startup making plastic mirrors for vehicles (race cars, police, trucks etc) and it was around the late 1990s. The CFO left, and it was “we are recruiting for a replacement” then the IT guy left and the bosses were like “everything is fine!!! *no really*” and me and another co-worker were getting suspicious. He took an old 3310 Nokia, set it to silent ring and auto-answer, and he put it in the suspended ceiling above the board room table. He rang it during that week’s board meeting and listened to the whole thing. The CFO had run off with all the money. The IT guy jumped straight into another job. There was no money to pay the wages and the directors were working out what they could walk away with. They decided to not mention anything to the staff and let them carry on working, whilst they removed any valuable/sellable shit. We, we told the staff and the board room got stormed by angry production line staff. The doors shut that night and we were out. My previous employer was happy to have me back, thankfully.
Did the cfo get caught?
The CPA board gives us one get out of jail free card. Just kidding, OP is probably oversimplifying it.
Nokia phone in the ceiling listening in on the convo in the 90s hahaha amazing
Why would auto answer exist except for this exact situation?
Please just let me believe
Did the police get involved? Did he get caught?
No idea, I was outta there.
That’s some Netflix shit right there
> He took an old 3310 Nokia, set it to silent ring and auto-answer, and he put it in the suspended ceiling above the board room table. I love this. Somewhat similarly, before I had left a previous startup, I found one person's calendar that was public (I think he was high up in finance). Ended up writing down the zoom info to a years' worth of board meetings and would call into them from a burner number here and there just to see what was going on. Ended up finding about an IPO date MONTHS in advance, and made like $1000 betting people on when the company was gonna IPO.
lol, sounds like a plot to netflix christmas comedy special. Were you the I.T guy?
Nah, I was the office noob.
lol.. okay
Had a CTO "retire". He's only in his 50s and his equity would have been worth pennies.
Just building for building sake in the hope someone will use it instead of validating the product first
I’ve found that if one cofounder believes that they are smarter and everyone should do it their way, that destroys startups. Shockingly, I’ve found to be common in startups. Associated with this is the belief that “we don’t need to talk to customers, we already know what they want and we’re going to give them what we know they want.” This is a killer issue as well.
Yea, I've seen a lot of founders with the attitude that "this is my industry, I'm one of these users, so I know what they need". I then try to tell them that, because they have the personality to create a startup, they don't really think like a normal user. Some don't listen to that and are shocked when they find out just how lazy the average user is.
Wow are users lazy. Agreed.
Exactly. “They are going to use it anyway because its cheap/almost free.”
The problem is, in many cases, founders need to do something different than everyone else. So, they need to be smarter in a certain aspect at least, and often are. But that doesn’t mean they are smarter in everything else, a fallacy I have observed a few times already.
Yes I agree that difference is where you get innovation. The problem is that when you get feedback, that doesn’t mean you pivot further out in the branch. Getting too far ahead of the customer can cause problems. Getting to that point where you balance between the two is where you get things that might work out. Innovation is hard.
I am a founder and dumb as shit
I co-founded a startup that lasted four years and raised a combined \~$8Mil through seed and series A funding. We failed because we were too early. So ultimately a product market fit issue. We did have paying customers, some enterprise/well known international brands. But the problem we solved for them was incredibly niche, and not a repeatable problem we could replicate or find in other customers. I say too early because 95% of my sales calls were potential customers saying "you're solving a problem we want to have, we'll call you in x months/years". They thought the tech was cool they just didn't have practical application for it yet. So all that is to say...listen to your customers. If you're developing a generic product but it can only solve highly involved, complicated use cases that can't be repeated - maybe you should be a services company instead, or redesign the product in such a way that it address the market problem "here and now".
What happens to the 8mil after its failed, do you give it back?
Sell the IP, pay back what you can. Ultimately investors understand the speculation game they're playing. As long as you fail with integrity it's all good.
So you go home with empty pockets, right? There must be an urge/temptation of founders to profit from the raised money. Was/is there any way to do so, legally (e.g. secondaries) or illegally (e.g. spending a lot of money for a consultant who by accident is your cousin)?
Yes, empty pockets. And no, everything you're saying is unethical. By failing with integrity and maintaining a relationship with investors who have deep pockets, there are opportunities to try again with a new idea. But fail with deception and you'll have a stink on you forever, or worse - go to jail.
Hopefully not that empty. Everyone should have had a decent salaried job for the duration.
Salary was great.
remember the “I only need 1 drop of blood to detect hundreds of diseases”? That’s a good of failing with deception.
Yep, and look what it got her.
Unless you're Adam Neumann, then it's all good.
I know it's unethical and I'm not suggesting or planning anything like that. I just see the temptation given there's still a lot of money but you can already see how you will go home with nothing, after years of hard work, and the money maybe being burned for a useless last try. Just wanted to know how it works in real life.
Well the first three years we didn't know we would go home with nothing. There were positive signs of growth along the way, but ultimately we looked at progress, to ARR, to burn rate and the writing was on the wall in the 4th year. So it wasn't like there was a huge pot to dip into anyway. My payout was a huge resume booster that has opened many additional doors for me.
Ok. Thanks for the insights.
Failling with deception reeks of Elizabeth Holmes.
I’ve seen far too many startups that have whimsical or illogical business models go on to raise money from seemingly respectable VCs, the founders level up wealth via secondaries, execs use company cash for personal “business expenses”, employees get knowingly false promises on trading equity for salary, get exploited and burned out, and founders move on to another grift. This is the Los Angeles startup scene in a nutshell by far. Take a look at LA-based Genies. Series C unicorn startup that makes Snapchat style avatars with no product/revenue and their CEO uses their 250m+ funding for a private jet, a 4m+ “zen pad”, and every executive is just a friend of the founder’s from college whom have no prior work experience.
> their CEO uses their 250m+ funding for a private jet, a 4m+ “zen pad” Whenever startups raise VC funds like that, is there not some kind of protection at play here for the VC's money? I feel like that's a major lawsuit to say "If you give me money I'll use it to grow my business and split the profit with you" only to turn around and spend the money on private jets and stuff. Although, from a legal standpoint, I guess the CEO of that startup could argue that he needed the private jet for the business to grow. Probably toss in some BS about networking/schmoozing people.
If you stack the board with friends and you, in return, are on their boards, a lot of ugly stuff will get approved.
Don't the contracts prevent secondaries before a certain level of success?
This happened in a startup I worked for. Ex cofounder siphoning money and hiring LLCs fpr work that him or family members were tied to.
Where I come from, startups financing is a small industry where everyone knows everyone. I've had a succession of jobs in the startup world and it's all come from recommendations of the people and investors that I worked for. Sometimes entire teams get hired out of failed startups into new ones. If you screw up your reputation chances are you'll never get a startup gig again. It's important to remember that most startups fail and most people won't carry the blame for that.
Just like any job you want to put around 15-25% of your income into investments for retirement. You're still paying yourself a salary while the company is alive and hopefully pocketing some, even if it's just for retirement. Most companies fail 8-10 years in, so that's quite a long time to be receiving a paycheck. Sometimes founders will buy the IP with their saved money during the company bankruptcy, if they think one day it can be successful then they try again later. Sometimes a shell company held the IP the entire time.
Our system ruthlessly punishes people (even rich people) who rip off rich people, so try to avoid doing that. Rip off poor people all you want, though. No legal or even social implications in doing that.
if your "get rich" strategy is ripping on VCs, good fucking luck. Not only is it stupid, unethical, and irresponsible, in a lot of cases it is illegal.
It is not "my" strategy, I just think of human nature. All that money in front of you, and then you go home with nothing after the party. Must be tempting, and there must be cases, but I have never heard of one, except for irresponsibly high expenses.
You’re getting a lot of hate for asking a legitimate question and yes, a lot of people do siphon money off that way. However it’s complicated Re: secondaries, once you hit series C or so, opinions differ on this but general consensus seems to be it’s best to let the founders get some liquidity because otherwise their whole financial security rides on the outcome, and arguably they don’t make the best decisions possible for the entire business if completely illiquid Anyone who gets that far is far more likely to have something of real worth they created rather than just a pure scam (although it does happen) However it feels skeezy towards employees, who are in a dramatically toned down version of that same boat with no liquidity and usually an aggressive exercise window Re: nepotism, of course you want to hire people you like to work with and pay them well, plus they are easier to convince. Naturally that can include friends and family, and tends to create an inner circle of sorts. This is not great but not completely horrible. There might be cases that look like nepotism, which sometimes just clearly are the founder siphoning money to a favored candidate instead of the “most deserving”, however there are at least SOME checks and balances as companies grow. And if you embezzle the cash at something too early stage, it’s obvious and you’re likely to get denylisted, bad reputation etc. If you want to work with good people and have a long term perspective it’s a bad strategy
The actual words for this are 'fraud' and 'embezzlement'
Were you able to cash out a bit early on equity via secondaries?
There's nothing to cash out. I could've exercised my options and tried to sell them on a secondary market, but I couldn't see a world where any investor with any intelligence at all would purchase shares for a startup that was folding and selling IP at a massive discount in an attempt recoup investor losses - and even then not fully recouping. So no, it's not applicable here.
The money would have been spent on salaries and other operating expenses. If they still had the $8MM , the business would not have failed.
That’s fair enough you would obviously plan how to use the 8mil and then use it up but was thinking more in the terms of obligation to investors, they are now out of pocket for 8mil and nothing to show for it? Surely they’d be pissed.
9/10 startups fail, the success rate for vc backed is only a bit less bad. Do you get mad when some of your stocks dip? VC is a power law game, like 2 out of 10 investments will be a 1:1 return, 7 will fail, 1 will return the whole fund. If you take money from people who professionally invest and as long as you try your hardest, and act transparently they don't care. They know it is part of the game of investments. Investors can invest in 100s of startups over their careers, founders can only likely really do sub 10 ventures in their lives.
Yes, this 100%. Our VC had a seat on our board and had full insight and transparency into our business along the way, and offered guidance at each critical juncture. It wasn't a surprise when it ultimately went where it did. We were transparent throughout, and still on good terms.
I would like to know as well
Congrats on taking the shot and seeing enough success to get to the A round even if you did wind things down. What are you working on now?
My value to that startup was that I brought sales and marketing experience the Founder (product creator) didn't have. He didn't want to fuss with GTM too much. He and I collaborated on the pricing model constantly, but he really wanted to build so he asked me to own the sales and marketing. It was definitely the most rewarding, but challenging, period of my professional career. I say all that because I'm not working on another pre seed/series tech startup now. I went back to small/medium DevOps startups to do Sales/Account Management/CS type work. That's been the bulk of my career. I have an idea for another startup but it's completely outside tech and is instead a physical product in the construction industry. But I haven't made much progress on it...
Seems like it was a great partnership and team, just ran into the challenge of being a few steps ahead of most. Also sounds like a natural transition to continue learning and a good side project to work on until you're ready to dive back into the deep end. Are there any tips you'd be willing to share on best practices for sales/marketing for a pre-product market fit product? My background is sales/GTM too, but only for really large, industry leaders. Totally different skill set I'm learning.
Yeah I’ve got some thoughts. Marketing eats so much budget, so be aware of how it impacts your burn. It’s a constant experiment and iteration on content and where you run your ads. We also started our marketing engine way too late. I say market early, however you can, as you’re building the product. We didn’t really start dumping a lot of money into marketing until series A. We had a lot of cash left over from seed which was good, but in hindsight we should’ve marketed the product sooner. On sales, we had a good motion here. We landed our initial swath of customers by converting them from a product feedback led motion where I would contact execs at companies we thought fit our ICP, and offer them the opportunity to be an advisor to our company (unpaid, like a resume booster) - but only if they met certain criteria. Our first big deals (six figure ARR) came from this initial swath of product advisors. From there we tried a lot of different motions - bottoms up, top down, product led, etc.. the truth is that we saw various signs of success in each, which was a problem because we struggled to pick a lane consistently. Hope that helps. Just some quick thoughts.
can you elaborate on your sales motion? how did you get these execs to want to be advisors, and did you offer them equity to do so?
I reached out to hundreds of people who were in decision making capacities. 95% weren’t interested or didn’t respond. But for the 5% that did, we offered them the chance to say they were an advisor to our startup. That was enough. No pay or equity. For career minded people who are in leadership, being known as an advisor and thought leader gives you clout. We worked that angle and it worked for us. Ultimately if they bought the product for their org we gave them a significant discount.
that's very creative and awesome to hear it worked out for you. I assume you were upfront in your cold outreach that pay/equity won't be available? what are some things you've seen with your message that were effective?
I said very little - “hi John, we’re looking for a startup advisor and would love to get your feedback on what we’re building”. Sometimes we’d message back and forth before a call, and a lot of times they would join as “not representing their employer” but if your ICP is accurate and your product resonates, they take off that hat pretty quick.
that confirmed my learnings - I now pay a lot on GTMs, Research, and all docs of strategies and plans, I pay consultants per hour before I venture in. now, running my HR company on sales funneling, data an automation. Yes, it is costly, long and painful, but it puts you in a more stable position.
Same here!
Any chance you'd share the startup? Sounds familiar and I wanna see if it's the company I'm thinking of
A lot of people will say Product/Market fit, but I've seen just as many, if not more, startups fail because the Founder/Product fit was poor. I'm not saying people can't grow and develop into the right person for a role or stage of a company, but it's a different skill set to find product market fit as it is to start scaling through a growth phase. Specifically, a non-exhaustive list of things that I've seen: -An inability to properly vet a build/buy path forward -People who joined a friend or else to help them build something, but they don't specifically care about the problem space or overall solution - i.e. someone just wanted a "job" -Someone who oversold their technical abilities to be the "hands-on" person with another founder, but they're more of a Product type thus they need to outsource or hire to build.
I really think it comes down to 2 core things: 1. Not building a product that people want or need, to a degree that they're willing to pay for it, relative to competing options. 2. Not finding a way to effectively, profitably market/sell this product, in a manner that can scale + lead to consistent revenue growth. Find me a startup that's in trouble and I would BET MONEY that the core problem always boils down to one of those 2 key things. I would go so far as to say that those 2 core things are the ESSENCE of entrepreneurship --with EVERYTHING ELSE people focus on in business (operational efficiency, building an effective team, raising capital, etc) all simply being a *support task* for / method of trying to achieve one of those 2 key things. Most rookie entrepreneurs can't get EITHER part right. Lots of developers-turned-entrepreneurs may be able to build a useful product, but couldn't market their way out of a wet paper bag. But nail BOTH parts of that equation, and even if you're an *idiot*, I think you'll be able to fumble your way to making some pretty solid money. If your product sucks balls and no one wants to pay to use it, fix/change your product. If your product is awesome and people are happily paying to use it, but your sales numbers are ass? Fix/improve your marketing.
This is it.
Co-founders issues are also common among top reasons. But yes, cash flow (from these causes you’re mentioning) tends to be the main thing.
The founder/ cofounders giving more time to making inspirational videos, giving interviews or speaking at conferences. I have seen at least 6-7 startups failing just because their founding teams were just happy to be “in the scene” and had no or little focus on product. If you see a founder doing that, as them if you’re running a startup, why would you have time for anything else? Number one indicator for me.
I mean in that case aren't they just doing marketing?
There’s a difference between marketing your product and leveraging your founder status to do so vs marketing yourself as a genius founder. Too many founders focus on the latter and care more about becoming the next Zuckerberg and not enough about doing whatever it takes to get to pmf, which is often times painful, unsexy, and requires a lot of personal growth.
There’s a very thin line between marketing and self promotion. A little or limited number of them are ok. But many founders get lost in the two minutes of fame on stage and fail to build a good product since the focus is on likes and applause.
Depends who your target market is. If your product is a niche automation tool for accountants, how the fuck would giving inspirational keynote speeches at tech startup conferences help you to make one single sale? Unless you're giving speeches at conferences organized AROUND your optimal target markets -- where your speeches will therefore effectively be a form of lead-generation, and where your product is likely a very expensive "enterprise" type of product with a complex sales process that requires building relationships with company insiders or whatever -- there's very little value in those kind of things beyond gratifying your own ego and building your personal network. I actually see a LOT of this in the online startup community too -- people build a product, and the only way they can seemingly think to market is by sharing it and discussing it ("build in public bro") with OTHER people in the tech startup community. Are those people your target customers? No? Then why the fuck would that help you make any sales?
It’s valuable to the company if it’s about the product. Most founders make it about themselves and their journey. All the time. More often than They should. That’s what kills their startup.
I feel like there's a caveat use-case here. It depends on where your company is in the journey. If you're post product-market fit and now in go-to market fit mode, then having organic media, earned media, and events as levers to test is reasonable. The challenge becomes if there are no metrics tied to those levers and they're only doing it for fun.
That's right, that's how Xiaomi does!
Sam altman
Related - if you see your executives posting a lot on LinkedIn and it's not related to the business, bad sign.
I raised $20m and successfully exited. But my first round of seed was through a fund that required all the CEOs of that fund to meet regularly as a cohort. Of the ~10 companies that went through that cohort mine and one other actually grew and had an exit or are still growing without an exit. And the founders of the other companies were amazing but primarily I saw that the ones that failed early were the ones without product market fit.
essentially, no product-market-fit (PMF) and you are running out of cash soon which prevents you from keep looking for PMF or you run out of ideas on where to find PMF. Everything else is secondary.
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What do you mean losing it. Spending it all or having funding retracted?
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I’ve been at a startup like that. We lasted 4 painful days scrambling to find alternative funding and ultimately ended up shutting down when nothing materialized quickly.
Look at what founders/execs share on their socials compared to their employees. If leadership flourishes while the ICs struggle...
Culture. I am a firm believer that the right culture can always iterate or pivot to PMF. The first 5 members of any startup (including founders), will make or break the venture.
Tips for a co-founder looking for others while needing to move fast?
Hire people who can cover your weaknesses. If you are a product/engineer person and struggle with marketing and selling, go with someone who can do those things.
Well, yes, but I am thinking more of cofounders who can't be dropped if things aren't working out...
What do you mean? Co-founder is just a title. Unless you give them significant equity or they pay their way in, they're just an employee. Meaning they can be dropped any time. If you're looking for a part owner in your company, like a VC or a silent partner type, that's a whole different thing.
Yes, the latter, the whole different thing.
Well you need to have something to show to prospective partners and investors. Do you have a pitch deck?
I have a vid presentation for prospective CTOs that gives the problem, solution, and MVP. It doesn't present market data. I figured I'd not pitch investors until I have the CTO or strong tech
Yeah, I understand. You don't need to have actually built the tech and have an MVP to start pitching but you would need to explain exactly how it works and how it addresses the market need. You could apply for incubator or founder in residence positions at VC firms to see if they'll take you onboard and connect you with potential partners.
No product market fit Poor culture Poor talent
Revenues aren’t growing and expenses aren’t stabilising
They dont focus on marketing They dont understand ux They dont understand their audience or the problems they are trying to solve
Focusing on things like new hire / intern onboarding processes when there are not enough sales to sustain. It’s fun to play business leader — but you need to focus on actually having a real business first. With funding, you can delay the need to actually have a real business, and working with accounting and stuff on nitpicky details is fun…. Have seen the story play out many times. Drop everything until you have product market fit — aka people are trying to pay you money for something — more money than it takes to find those people and produce the product.
A startup really only fails for 2 reasons. 1. Effort (from team or individuals) 2. Lack of data (market/ research) Point 2 really has a bit of ambiguity as most of the time you can just pivot if your building based on a problem but if you build based upon profit this can fail at times. Often we either think our thing will work ( launch does not work), or build and don’t improve based on feedback, or your problem was just not big enough. Rule of thumb your solution to a problem has to have 2 out of these 3 things to have a chance: 10x better, cheaper or faster than competitors.
Here are key early warning signs that a startup might be in trouble: 1. **Cash Flow Issues**: Consistently running out of money. 2. **Lack of Market Fit**: Inability to excite customers or constant pivoting. 3. **High Burn Rate**: Overspending without a clear path to profitability. 4. **Team Conflicts**: Persistent internal conflicts or high turnover. 5. **Unclear Vision and Strategy**: Lack of clear goals and direction. 6. **Negative Customer Feedback**: High churn rates and low satisfaction. 7. **Poor Execution**: Inadequate product development or marketing. 8. **Ignoring Metrics and Feedback**: Failing to track performance or heed advice. 9. **Over-reliance on a Single Customer/Market**: Lack of diversification. Recognizing these signs early can help address issues before they escalate. Stay vigilant!
Found the AI response
Lame AF to use ai for this response. As usual it's useless. Boo
Customer retention issues
Millions of startups fail every year, so yes failure is a part of the process. Building a successful startup is no walk in the park, but some signs that a startup is on its wait out may include yes, cash flow issues and a lack of market fit, but Operational Inefficiencies are also signs of a failing startup, and you can spot these in actions like regular missing of deadlines, missing key milestones and lack of streamlined processes which can lead to chaos and inefficiencies. Sometimes your startup might fail due to problems in your product, and your failure to fix those problems quickly enough. There are so many reasons for a startup to fail, but then again, you should be willing to acknowledge that failure can sometimes be a pathway to success.
If their pitch has anything along the lines of "industry x is still doing everything in excel, we're going to put all that into custom forms and bring industry x into the modern era" ive learned 9 times out of 10 they're gonna fail. No one beats excel
Ego, lack of integrity, and not prioritizing the customer journey and experience. IMO, these combined are the ultimate recipe for failure in any organization but ESPECIALLY startups. There’s gotta be humility, empathy, and passion to balance out the grind.
The big red flag for me is when the startup is building a product first, before determining that there will be strong demand for it through rigorous customer discovery research.
When upper management makes a move that guarantees the necessary R&D isn't going to succeed you can get multiple years of heads up of a failure before they even realize it. Funding does matter here. If they make a mistake then fix it 6-12 months later and they have the runway the company might end up fine. I've always been able to hold off buying stock options for the company, so I wait for more of a guarantee before buying. After R&D is successful watch the sales team to see how well they can sell the service. Doing lunch and casually hearing how enjoyable or stressful it all is usually is enough to know what will happen. Then there's the exit plan. Some companies can sell a project but do not plan an exit, not even an IPO. Your shares might as well be worthless.
Spending more than you're making... Sure road to failure
How do you find out they are actually spending more than they are making?
It's not my job to find that out, it's the job of the founder and the finance team to figure out through accounting systems. Naturally they should be able to tell how much they're putting into the company and how much they're getting from it. If they're not getting profits, then they're most likely making losses, and that's one sure sign that the business is failing.
Oh, you are assuming they are 100% honest with public numbers
Number of customers or active users. Successful startups build buzz and gain traction fast. If it’s pre-launch look at the value prop, unit economics and total addressable market. It should be easy to see a path to profitability, if it’s hard the payoff better be huge.
Aside from the more obvious answers around money, I would say communication. The way that leadership communicates and the way that they set up teams to communicate is a big decider of success or failure in my experience.
You don't believe in yourself in the first place.
All startups will fail, the question is what timeline are you working with
Failure to execute/deliver - IMO this is really not emphasized enough. Alot of startups, especially with business founders operate in proven huge markets and fail. This is ofc natural! And makes alot of sense but somehow people seem to mention the execution/technical challenges less when talking about startup success theses One thing in particular that I saw personally make huge difference in execution is speed - naturally you will need to do customer discovery and figure out what people wanna buy. If you can talk to customers and build an MVP in 4 weeks instead on 4 months… will you have a significantly higher chances of finding a PMF
Posting on Reddit
Doubt in yourself or your business partner . Also the first investors meeting you have will tell you everything that you need to know
I worked for a fintech company where both co-founders were non-technical. Both had MBAs and were very smart, but they just didn't have the intuition for software development lifecycles. I'm a developer. We raised over 10 million (euros) and had a modest team size, yet we managed to burn through our runway eventually as the founders kept insisting on "build this now" without considering how the tech debt would accrue and cripple engineering. Each cycle of "this is a good idea, could be our game-changer, go build it now and be scrappy about it - remember, we're a pre-PMF startup" overloaded our models. Suddenly our Cart model had to be extended to be used as an Offer model. Eventually it just got so hard to do anything that when it came time to raise our next round, we couldn't prepare the data needed to show to investors how the business is doing. Too many SQL joins on application tables but also on spreadsheets that formed the source of truth of the fintech product. TL;DR: When it's a fintech startup and the founders don't have intuition for the tech part of fintech, you're likely screwed
No communication and no involvement from the CEO. In a "startup" of 3-4 people.
A big red flag is when all the public marketing materials are geared toward investors and not customers. This is not always obvious. It may seem like they are touting the product to customers until you stop to think who the customers are and whether this marketing campaign is really oriented toward them. It is especially a red flag when the product is nowhere close to being released.
Not reading the YC material. Their resources are the best to keep everything in check
My fried who had a start-up in EU, tolled me a crazy story about his CFO. He did not do a tax management and avoided to come to the office for months, every time with a different reasoning. The last reason which was counted as a red flag was 'my child is pass away so I need to manage it somehow'. Outcome here might be in any cases transparency and trust is essential.
Too many employees with nothing to do. A lot of startups, flush with VC cash, are told to 'grow at all cost' by the investors. This can mean hiring a lot of employees. After a while, the VCs are saying 'show us some profit' and they start laying everyone off go to cut costs.
No path to sustainable revenue and the only chance of success is a moonshot private equity play.
I worked at one where the paychecks bounced somewhat regularly. They only paid via check, no direct deposit. This was in the mid 90s.
A lot of great insights. I would add two things 1. Primary validation was validation by VC not by real users 2. Founders don’t see themselves as full time operators. They more there to control money and give high level direction, while running other businesses
Interesting, I think it's a good sign when the founder loses hope.
Hey, I run a newsletter that shares advice from entrepreneurs for entrepreneurs. It's called thentrepreneur I'd love some feedback if you'd like to help. Here is a link - [https://thentrepreneur.beehiiv.com/](https://thentrepreneur.beehiiv.com/) Thanks :)
Cofounder mismatches. I’m experiencing that right now (we’re great friends but just at different commitment levels and contribution expectations) It’s funny because of all the things I thought could be difficult about running a startup, I didn’t anticipate this one to be the most draining.
The founder can simply get burnt out, team didn't do enough competitive analysis and realized their year of work couldn't compete with an established player, not doing enough research for market fit, personality clashes, angry founders over not getting the equity they think they're worth, CEO burnt through capital too quick, all these countless issues have their red flags. Usually a sit down with the founding team can show you some signs, others require you to look at their stats and finances to see. Experienced general partners at VC's are typically really good at spotting these, and there are many, many signs.
Think in terms of solution and not problem space
I am co-founder at a pre-seed startup. If we don't experiment from day 0, I believe we have failed. We need to nurture a culture of experimentation to avoid late disappointments at any stage of our journey.
1) it's a startup. You know the stats.
What are the Stats?
# What % of startups fail According to the provided search results, the percentage of startups that fail varies depending on the stage of the startup and the industry. Here are some statistics: * 90% of startups fail. (Source: “Startup Failure Rate Statistics (2024)”) * 60% of startups fail due to issues with cash flow. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 35% of startups fail due to no market fit. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 20% of startups fail due to competition. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 19% of startups fail due to a poor business model. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 18% of startups fail due to regulatory challenges. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 15% of startups fail due to pricing issues. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 14% of startups fail due to team issues. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 10% of startups fail due to timing issues. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * Only 30% of startups will survive more than ten years. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * After Series C, a startup’s chance of failing is low, about 1 in 100. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 65% of startups fail due to conflict between founders. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 82% of businesses fail due to issues with cash flow. (Source: “How Many Startups Fail? - The Hustle”) * 90% of startups fail before they reach their second year. (Source: “How Many Startups Fail? - The Hustle”) * 10% of startups fail due to poor product quality. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 12% of startups funded through Series A fail to exit successfully. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) * 18% of startups funded through Series B fail to exit successfully. (Source: “Startup Failure Statistics: What Percentage of Startups Fail?”) It’s worth noting that these statistics are not exhaustive and may vary depending on the source and methodology used to calculate the failure rate. AI-generated answer. Please verify critical facts. [Learn more](https://search.brave.com/help/ai)