"Startups die mainly because of a failing strategy . Then because the team in charge doesn't work properly. Financial problems are not the major cause of failure of these companies. »
It ‘s with these very straight words that Ludovic DUPUY (Brennus Conseil) introduced a few weeks ago an article on the death of our startups, of which I take up here the main elements to end our saga on startups and their life, their death and, in this way, the interest of Business mentoring as we practice it at ADINVEST International!
WHAT? HOW ? Financial problems are not the first cause of startup failure?
So I would have been lied to?????
All joking aside, here are a few factual elements, which are the cause of startups death, translated from a study carried out and written by 178 startuppers who blowed their company (it does not make it an absolute truth but it gives a good overview of the subject):
1) The errors made in strategy:
- Wanting to create a solution or a product that looks for a problem instead of starting from the problem to solve it, at least to check that there is indeed a problem at the beginning (or an expressed or latent need)!
- Neglecting competitive analysis, often insufficiently searched and with no real watch afterwards, with the result of being overtaken by a competitor!
- Lack of coherence between the added value perceived by the customer, the announced price and the cost price, with the effect of not covering the costs AND not meeting its market: the "double penalty"!
- A product/service that is too complex and which phagocytes the benefit perceived by the customer: the market won’t adopt it!
- The absence of a realistic business model allowing a real growth phase beyond the POC.
- Minimizing the weight of business development (marketing and sales) when this is a key point for success!
- Not listening to your user customers, especially the first ones !!! not "learning" from your market in order to correct yourself ...
- Not being in tune with the "time to market", before time is not time and after time is no longer the time! (Easier said than done, I agree!).
- If you have to be "agile" in your organization, pivoting for pivoting's sake is not worth it, which brings us back to the need to analyze the reasons for failure and to provide a strategic response.
- Not taking in account the barriers to entry and the global environment including, for example, the legal, statutory and normative aspects.
2) Mistakes at the team level :
- Not having been able to set up the right team (complementarity) and/or seeing the founders "get lost along the way", not being able to remain "focused" on the objectives. You can quickly get "dizzy" when you succeed in raising funds...
- Not having the lucidity and humility to accept to be accompanied (or to ask to be accompanied) via ADINVEST's Business mentoring for example. We are not omniscient and gaining perspective must quickly become a priority for the manager.
- When founders and investors are not in phase: it is better to have no investor at all rather than an investor entered "by default". The "game" must be made right from the start in order to hold out in time and face the hard knocks that are bound to come...
- Incapacity of the manager to make the (right) decisions at the right time, the very real risk of his "blowing up in flight" if he does not manage the pressure and does not delegate when necessary.
3) Errors on the financial side :
- Liquidity is not managed in a judicious and frugal manner, in view of the period of growth that will place heavy demands on it. What about the profitability of the funds spent?
- An inability to interest investors in raising funds: an eternal dilemma, especially in France, a country where venture capitalists are not many, to the benefit of development capital, which is much more easily present when the risk is reduced, i.e. when the startup is no longer really a startup.
To take up Ludovic DUPUY's conclusion (which I, of course, endorse):
"Having a product that corresponds to a real need, ignoring nothing, growing rapidly and recovering even more quickly from hard times. These four characteristics are essential to hope for success.
I will add a fifth element: "In the acceleration phase, the entrepreneur must work on his business, not only in his company".