Top 20 Reasons why Startups Fail

From lack of product-market fit to disharmony on the team, we break down the top 20 reasons for startup failure by analyzing 101 startup failure post-mortems.
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reason startup Fail Top post mortem company FAILURE PRODUCT TEAM
From lack of product-market fit to disharmony on the team, we break down the top 20 reasons for startup failure by analyzing 101 startup failure post-mortems.
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
reason startup Fail Top post mortem company FAILURE PRODUCT TEAM
2019
The Top 20 Reasons 
Startups Fail  
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The Top 20 Reasons Startups Fail
Table of Contents
#20: FAILURE TO PIVOT  
 
 
6
#19: BURNOUT  
 
 
 
8
#18: DIDN’T USE NETWORK 
 
 
10
#17: LEGAL CHALLENGES 
 
 
11
#16: NO FINANCING / INVESTOR INTEREST 
13
#15: FAILED GEOGRAPHICAL EXPANSION  
15
#14: LACK PASSION 
 
 
 
17
#13: PIVOT GONE BAD 
 
 
 
19
#12: DISHARMONY AMONG TEAM / INVESTORS 
21
#11: LOSE FOCUS 
 
 
 
23
#10: PRODUCT MISTIMED 
 
 
25
#9: IGNORE CUSTOMERS  
 
 
27
#8: POOR MARKETING 
 
 
 
28
#7: PRODUCT WITHOUT A BUSINESS MODEL 
29
#6: USER UN-FRIENDLY PRODUCT 
 
31
#5: PRICING / COST ISSUES 
 
 
32
#4: GET OUTCOMPETED  
 
 
34
#3: NOT THE RIGHT TEAM 
 
 
36
#2: RAN OUT OF CASH 
 
 
 
38
#1: NO MARKET NEED 
 
 
 
40
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The Top 20 Reasons Startups Fail
After we compiled our list of startup failure post-mortems, one of 
the most frequent requests we got was to use these posts to figure 
out the main reasons startups failed.
Startups, corporations, investors, economic development folks, 
academics, and journalists all wanted some insight into the question:
“WHAT ARE THE REASONS STARTUPS FAIL?” 
So we gave those post-mortems the CB Insights’ data treatment 
to see if we could answer this question.
After reading through every single of the 101 postmortems, we’ve 
learned there is rarely one reason for a single startup’s failure. 
However, we did begin to see a pattern to these stories.
And so after sifting through the post-mortems, we identified the 
top 20  reasons startups failed.
Since many startups offered multiple reasons for their failure, 
you’ll see the chart highlighting the top 20 reasons doesn’t add up 
to 100% (it far exceeds it).
Following the chart is an explanation of each reason and relevant 
examples from the postmortems.
From lack of product-market fit to 
disharmony on the team, we break down 
the top 20 reasons for startup failure by 
analyzing 101 startup failure post-mortems.
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The Top 20 Reasons Startups Fail
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The Top 20 Reasons Startups Fail
There is certainly no survivorship bias here. But many very relevant 
lessons for anyone in the entrepreneurial ecosystem.
It’s worth noting that this type of data-driven analysis would 
not be possible without a number of founders being courageous 
enough to share stories of their startup’s demise with the world. 
So a big thank you to them.
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The Top 20 Reasons Startups Fail
Not pivoting away or quickly enough from a bad product, a bad 
hire, or a bad decision was cited as a reason for failure in 7% of 
the post mortems. Dwelling or being married to a bad idea can sap 
resources and money as well as leave employees frustrated by a 
lack of progress.
Imercive is one company that went under due to a failure to pivot. 
The company, which shut down in 2009, originally intended to let 
people order from local restaurants via instant messages.
After that concept proved too difficult and expensive to be 
functional, founder Keith Nowak decided to think bigger. Instant 
messaging could be used to help people interact with all kinds of 
businesses, not just restaurants — and in turn, it would help those 
businesses interact better with their customers.
But by the time Nowak recognized this new, bigger opportunity, 
Imercive had already spent most of the money from its seed round. 
Without any results to show for it, nor any proof that the new 
vision could gain traction, the company had to close down.
#20: Failure to pivot
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The Top 20 Reasons Startups Fail
As Keith Nowak writes in Imercive’s post-mortem: 
“We were caught mid-pivot – half way between a 
strategy we knew wouldn’t work and one which we 
believed could be successful but was not able to be 
aggressively pursued. This was a very difficult place 
to be both professionally and personally. We were 
extremely frustrated at not being able to properly 
go after our new strategy and every day that passed 
without meaningful progress was one step closer to 
the failure of my first company. Even though we put 
everything we had into getting through this phase we 
were never able to make it through the pivot.” 
However, some say pivoting isn’t always the answer. Union Square 
Ventures’ Fred Wilson wrote in a 2018 blog post that the concept 
of pivoting out of a bad startup idea is overrated, and that often it’s 
better to just let a bad idea fail: 
“There is nothing I dislike more than carrying on with 
something when I’ve lost interest, and worse, the 
founders have lost interest. So my view is if you’ve 
failed, accept it, announce it, and deal with it. Shut the 
business down, give back the cash, and rip up the cap 
table. Then do whatever you want to do next. If it is 
another startup, do it from scratch and keep as much  
of it as you can. If it is something else, well then do  
that too.”
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The Top 20 Reasons Startups Fail
Work-life balance is not something that startup founders often get, 
so the risk of burning out is high. Burnout was given as a reason 
for failure 8% of the time. The ability to cut your losses where 
necessary and redirect your efforts when you see a dead end was 
deemed important to succeeding and avoiding burnout, as was 
having a solid, diverse, and driven team so that responsibilities can 
be shared.
What can make conversations about burnout difficult, especially in 
Silicon Valley, is the widespread belief that building a successful 
company will always involve some degree of possibly hazardous 
overwork. As Uber board member and CEO of Thrive Global 
Arianna Huffington puts it: 
“The prevalent view of startup founders in Silicon Valley 
is a delusion that in order to succeed, in order to build a 
high-growth company, you need to burn out.”
#19: Burnout
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The Top 20 Reasons Startups Fail
At the same time, various founders have spoken up about how 
damaging burnout can be. Former Zenefits CEO Parker Conrad  
has said, 
“I think people are unprepared for how hard and awful it 
is going to be to start a company. I certainly was.”
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The Top 20 Reasons Startups Fail
We often hear about startup entrepreneurs lamenting their lack of 
network or investor connections, so we were surprised to see that 
one of the reasons for failure was entrepreneurs who said they did 
not properly utilize their own network.
As Kiko wrote, 
“Get your investors involved. Your investors are there to 
help you. Get them involved from the start, and don’t be 
afraid to ask for help. I think we made the mistake early 
on of trying to do (and know) everything ourselves, 
perhaps out of insecurity over being so new to the 
business world. This is a mistake.”
#18: Didn’t use network
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The Top 20 Reasons Startups Fail
Sometimes a startup can evolve from a simple idea and enter a 
world of legal complexities that can ultimately shut it down.
For example, Decide.com launched in 2011 as a tool to help 
people predict when the prices of certain consumer goods would 
change. Alongside listed prices for products from major retailers 
like Target and Best Buy, Decide.com included the price of an item 
on Amazon. As the company wrote in its post-mortem, Amazon 
wasn’t happy with that: 
“We received a notice from them informing us we 
weren’t compliant and unless we removed it they’d 
suspend our affiliate account. We weren’t making a lot 
of money but that account probably represented more 
than 80% our revenue.”
#17: Legal Challenges
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The Top 20 Reasons Startups Fail
Various music startup post-mortems also associated the high 
costs of dealing with record labels and legal headaches as a 
reason for startup failure.
High-profile startup Turntable.fm wrote, 
“Ultimately, I didn’t heed the lessons of so many failed 
music startups. It’s an incredibly expensive venture to 
pursue and a hard industry to work with. We spent more 
than a quarter of our cash on lawyers, royalties and 
services related to supporting music. It’s restrictive. 
We had to shut down our growth because we couldn’t 
launch internationally.”
Smart luggage manufacturer Bluesmart also fell victim to legal 
challenges. The company shut down in 2018 after most major US 
airlines enacted a policy requiring all airline travelers to remove 
lithium-ion batteries from their checked luggage: 
“We have bittersweet news to share. The changes in 
policies announced by several major airlines at the 
end of last year—the banning of smart luggage with 
non-removable batteries—put our company in an 
irreversibly difficult financial and business situation. 
After exploring all the possible options for pivoting and 
moving forward, the company was finally forced to wind 
down its operations and explore disposition options, 
unable to continue operating as an independent entity.”
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The Top 20 Reasons Startups Fail
 
 
Tying to the more common reason of running out of cash, a 
number of startup founders explicitly cited a lack of investor 
interest either at the seed follow-on stage (the Series A Crunch)  
or at all.
Smart earbud startup Doppler took hundreds of meetings to try 
to raise the necessary capital, but investors just didn’t seem to 
believe in the general market: 
“The market has shifted remarkably for hardware. We 
are incredibly bullish on the Here Two, and the OTC 
Hearing Aid Act has passed, but we need real capital 
to do it. The feedback we continually got is, ‘we are 
not investing in hardware, and we especially are not 
investing in hardware at these numbers.’ It’s too high a 
risk even for the Valley.”
#16: No financing / investor interest
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The Top 20 Reasons Startups Fail
A similar fate befell the “real time reconnaissance platform” 
Shnergle, which shut down in 2013 due to an insufficient amount 
of available “risk capital” in its geographic region: 
“Does your idea only monetise at scale? If your idea 
can only be monetised at scale, head to San Francisco / 
Silicon Valley. There isn’t enough risk capital, or enough 
risk appetite, in the UK/EU venture market to pour 
capital into unproven R&D concepts. If you want to build 
in the UK, find some way of charging money from day 
one. You can still use a freemium structure to up-sell 
later. Shnergle was never going to monetise before it 
had scaled fairly significantly. Fail!”
Lastly, sometimes companies can’t raise the money they need is 
because one of their competitors already did. This was the case 
for Sidecar, which raised more than $35M for its ride-sharing and 
B2B delivery service before being forced to sell to GM in 2016: 
“In short, we were forced to shut down operations 
and sell. We were unable to compete against Uber, 
a company that raised more capital than any other 
in history and is infamous for its anti-competitive 
behavior. The legacy of Sidecar is that we out-innovated 
Uber but still failed to win the market. We failed – for 
the most part – because Uber is willing to win at any 
cost and they have practically limitless capital to do it.”
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The Top 20 Reasons Startups Fail
Location was an issue in a couple of different ways. The first was 
that there has to be congruence between your startup’s concept 
and location.
As the location-aware instant messaging service Meetro wrote, 
“We launched our product and got all of our friends in 
Chicago on it. We then had the largest papers in the 
area do nice detailed write-ups on us. Things were 
going great …The problem we would soon find out 
was that having hundreds of active users in Chicago 
didn’t mean that you would have even two active 
users in Milwaukee, less than a hundred miles away, 
not to mention any in New York or San Francisco. The 
software and concept simply didn’t scale beyond its 
physical borders.”
#15: Failed geographical expansion
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The Top 20 Reasons Startups Fail
Location also played a role in failure for remote teams. The key 
being that if your team is working remotely, make sure you find 
effective communication methods, otherwise lack of teamwork 
and planning could lead to failure.
As Devver wrote, 
“The most significant drawback to a remote team is the 
administrative hassle. It’s a pain to manage payroll, 
unemployment, insurance, etc in one state … for a small 
team, it was a major annoyance and distraction.”
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The Top 20 Reasons Startups Fail
There are many good ideas out there in the world, but 9% of 
startup post-mortem founders found that a lack of passion for a 
domain and a lack of knowledge of a domain were key reasons for 
failure no matter how good an idea is.
In NewsTilt’s post-mortem, the team candidly spoke about their 
lack of interest in the domain they selected: 
“I think it’s fair to say we didn’t really care about 
journalism. We started by building a commenting 
product which came from my desire for the perfect 
commenting system for my blog. This turned into 
designing the best damn commenting system 
ever, which led to figuring out an ideal customer: 
newspapers…
#14: Lack of passion
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The Top 20 Reasons Startups Fail
“But we didn’t really care about journalism, and weren’t 
even avid news readers. If the first thing we did every 
day was go to news.bbc.co.uk, we should have been 
making this product. But even when we had NewsTilt, 
it wasn’t my go-to place to be entertained, that was 
still Hacker News and Reddit. And how could we build a 
product that we were only interested in from a business 
perspective.”
Doughbies, which raised $670,000 for an on-demand cookie 
delivery service in 2013, also failed because of a lack of interest 
from its founders and team. The company appeared to be doing 
well, with 36% gross margins and 12% net profit at the time it shut 
down. The problem, as CEO Daniel Conway put it, was that there 
wasn’t massive growth or enough interest in running the business: 
“Ultimately we shut down because our team is ready to 
move on to something new.”
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The Top 20 Reasons Startups Fail
Pivots like Burbn to Instagram or ThePoint to Groupon can go 
extraordinarily well. Or they can start you down the wrong road.
As Flowtab’s post-mortem explains, 
“Pivoting for pivoting’s sake is worthless. It should 
be a calculated affair, where changes to the business 
model are made, hypotheses are tested, and results are 
measured. Otherwise, you can’t learn anything.”
For David Hyman, the founder of Blin.gy, a last-ditch attempt to 
save his startup from failure led him to pivot: 
“Blin.gy was a pivot from our earlier app, Chosen, which 
attempted to gamify the performance competition 
space… We came up with a fresh take on the plethora of 
AR-style apps that create visual effects based on face 
detection and tracking.”
#13: Pivot gone bad
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The Top 20 Reasons Startups Fail
In the end, the new direction didn’t save the company: 
“[Poor user experience] had a big impact on our 
retention metrics. We needed 40% day-one returns and 
were closer to 25%. The clock kept ticking… We set up 
18 VC meetings and hit the road, hard. The feedback 
was eye-opening and generally the same: ‘Really great 
technology and vision. But how does this become a 
platform?’… We didn’t have a compelling answer.”
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The Top 20 Reasons Startups Fail
Discord with a cofounder was a fatal issue for startup post-
mortem companies. But acrimony isn’t limited to the founding 
team, and when things go bad with an investor, it can get ugly 
pretty quickly as evidenced in the case of ArsDigita.
Phillip Greenspun writes:
“For roughly one year Peter Bloom (General Atlantic), 
Chip Hazard (Greylock), and Allen Shaheen (CEO) 
exercised absolute power over ArsDigita Corporation. 
During this year they:
1. spent $20 million to get back to the same revenue 
that I had when I was CEO 
2. declined Microsoft’s offer (summer 2000) to be the first 
enterprise software company with a .NET product … 
3. deprecated the old feature-complete product (ACS 
3.4) before finishing the new product (ACS 4.x) … 
#12: Disharmony among team / investors
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The Top 20 Reasons Startups Fail
4. created a vastly higher cost structure; I had 80 
people mostly on base salaries under $100,000 and 
was bringing in revenue at the rate of $20 million 
annually. The ArsDigita of Greylock, General Atlantic, 
and Allen had nearly 200 with lots of new executive 
positions at $200,000 or over … 
5. surrendered market leadership and thought leadership”
At Pellion Technologies, the end came more quietly, as its major 
backer Khosla Ventures lost faith in the company’s ability to execute: 
“According to former employees, all of whom requested 
anonymity, Khosla Ventures lost confidence that Pellion 
could make enough money serving a niche market.  
The lithium-metal technology worked for products  
like drones, but the big money in the battery world is  
in the automotive sector. Investors weren’t willing 
to sink the money needed to develop the battery for 
electric vehicles.”
In March 2019, Khosla decided the company would be shut down, 
and removed Pellion’s name from its online firm portfolio.
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The Top 20 Reasons Startups Fail
Getting sidetracked by distracting projects, personal issues, and/
or general loss of focus was mentioned in 13% of stories as a 
contributor to failure.
As MyFavorites wrote at the end of its startup experience, 
“Ultimately when we came back from SXSW, we all 
started losing interest, the team was all wondering 
where this was eventually going, and I was wondering 
if I even wanted to run a startup, have investors, have 
the responsibility of employees and answering to a 
board of investors.”
#11: Lose focus
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The Top 20 Reasons Startups Fail
Similarly, the post-mortem for e-commerce startup DoneByNone, 
cites a lack of focus and its effect on the customer experienced as 
reasons for the company’s demise: 
“Here’s the long story: we’re a small start-up, and as 
you can imagine, life has been quite tough for small 
e-commerce retailers – and we went to hell and 
hopefully are on our way back from there. While we were 
focusing on other things that needed solving, we took 
our eyes off you and your issues.”
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The Top 20 Reasons Startups Fail
If you release your product too early, users may write it off as not 
good enough and getting them back may be difficult if their first 
impression of you is negative. And if you release your product  
too late, you may have missed your window of opportunity in  
the market.
As a Calxeda employee said, 
“In [Calxeda’s] case, we moved faster than our 
customers could move. We moved with tech that 
wasn’t really ready for them – ie, with 32-bit when they 
wanted 64-bit. We moved when the operating-system 
environment was still being fleshed out – [Ubuntu Linux 
maker] Canonical is all right, but where is Red Hat? We 
were too early.”
#10: Product mistimed
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The Top 20 Reasons Startups Fail
VR platform Vreal intended to build a virtual reality space for video 
game streamers to hang out with their viewers and raised almost 
$12M in its 2018 Series A. However, the available hardware and 
bandwidth capabilities didn’t evolve as fast as the company had 
expected, and though it delivered on its promise, Vreal struggled to 
attract any significant usage: 
“Unfortunately, the VR market never developed as 
quickly as we all had hoped, and we were definitely 
ahead of our time. As a result, Vreal is shutting down 
operations and our wonderful team members are 
moving on to other opportunities.”
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The Top 20 Reasons Startups Fail
Ignoring users is a tried and true way to fail. Tunnel vision and not 
gathering user feedback are fatal flaws for most startups.
For instance, eCrowds, a web content management system 
company, said, 
“We spent way too much time building [our product] for 
ourselves and not getting feedback from prospects — it’s 
easy to get tunnel vision. I’d recommend not going more 
than two or three months from the initial start to getting 
in the hands of prospects that are truly objective.”
Similarly, VoterTide wrote, 
“We didn’t spend enough time talking with customers 
and were rolling out features that I thought were great, 
but we didn’t gather enough input from clients. We 
didn’t realize it until it was too late. It’s easy to get 
tricked into thinking your thing is cool. You have to pay 
attention to your customers and adapt to their needs.”
#9: Ignore customers
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The Top 20 Reasons Startups Fail
Knowing your target audience and knowing how to get their 
attention and convert them to leads and ultimately customers is 
one of the most important skills of a successful business. But 
an inability to market was a common failure especially among 
founders who liked to code or build product but who didn’t relish 
the idea of promoting the product.
As Overto wrote, 
“Thin line between life and death of internet service 
is a number of users. For the initial period of time the 
numbers were growing systematically. Then we hit the 
ceiling of what we could achieve effortlessly. It was a 
time to do some marketing. Unfortunately no one of us 
was skilled in that area. Even worse, no one had enough 
time to fill the gap. That would be another stopper if we 
dealt with the problems mentioned above.”
#8: Poor marketing
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The Top 20 Reasons Startups Fail
Most failed founders agree that a business model is important – 
staying wedded to a single channel or failing to find ways to make 
money at scale left investors hesitant and founders unable to 
capitalize on any traction gained.
As Tutorspree wrote, 
“Although we achieved a lot with Tutorspree, we failed 
to create a scalable business … Tutorspree didn’t scale 
because we were single channel dependent and that 
channel shifted on us radically and suddenly. SEO was 
baked into our model from the start, and it became 
increasingly important to the business as we grew and 
evolved. In our early days, and during Y Combinator, 
we didn’t have money to spend on acquisition. SEO was 
free so we focused on it and got good at it.”
#7: Product without a business model
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The Top 20 Reasons Startups Fail
At Aria Insights, the concept of outfitting drones with sensors to 
collect data from extreme environments seemed promising. But 
while the company got off the ground and found a few high-profile 
investors — including Bessemer Venture Partners — it ultimately 
couldn’t find a compelling use for that data, and therefore couldn’t 
adequately monetize its business model: 
“CyPhy Works rebranded as Aria Insights in January 
2019 to focus more on using artificial intelligence 
and machine learning to help analyze data collected 
by drones. ‘A number of our partners were collecting 
and housing massive amounts of information with our 
drones, but there was no service in the industry to 
quickly and efficiently turn that data into actionable 
insights,’ Lance Vanden Brook, former CyPhy and 
current Aria CEO said at the time of the rebranding.”
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The Top 20 Reasons Startups Fail
Bad things happen when you ignore what a users wants and need, 
whether consciously or accidentally.
Here’s what GameLayers wrote on their product UI, 
“Ultimately I believe PMOG lacked too much core game 
compulsion to drive enthusiastic mass adoption. The 
concept of “leave a trail of playful web annotations” was 
too abstruse for the bulk of folks to take up. Looking 
back I believe we needed to clear the decks, swallow our 
pride, and make something that was easier to have fun 
with, within the first few moments of interaction.”
#6: User un-friendly product
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The Top 20 Reasons Startups Fail
Pricing is a dark art when it comes to startup success, and startup 
post-mortems highlight the difficulty in pricing a product high enough 
to eventually cover costs but low enough to bring in customers.
Delight IO saw this struggle in multiple ways, writing, 
“Our most expensive monthly plan was US$300. 
Customers who churned never complained about the 
price. We just didn’t deliver up to their expectation. We 
originally priced by the number of recording credits. 
Since our customers had no control on the length of 
the recordings, most of them were very cautious on 
using up the credits. Plans based on the accumulated 
duration of recordings make much more sense for us 
and the number of subscription showed.”
#5: Pricing / cost issues
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The Top 20 Reasons Startups Fail
The 2019 shutdown of genetic testing and scientific wellness 
startup Arivale came as a surprise to many partners and 
customers, but the reason behind the company’s failure was as 
simple: the price of running the company was too high compared 
to the revenues it brought in: 
“Our decision to terminate the program today comes 
despite the fact that customer engagement and 
satisfaction with the program is high and the clinical 
health markers of many customers have improved 
significantly. Our decision to cease operations is 
attributable to the simple fact that the cost of providing 
the program exceeds what our customers can pay for 
it. We believe the costs of collecting the genetic, blood 
and microbiome assays that form the foundation of the 
program will eventually decline to a point where the 
program can be delivered to consumers cost-effectively. 
Regrettably, we are unable to continue to operate at a 
loss until that time arrives…”
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The Top 20 Reasons Startups Fail
Despite the platitudes that startups shouldn’t pay attention to the 
competition, the reality is that once an idea gets hot or gets market 
validation, there may be many entrants in a space. And while 
obsessing over the competition is not healthy, ignoring them was 
also a recipe for failure in 19% of the startup failures.
Mark Hedland of Wesabe talked about this in his post-mortem stating: 
“Between the worse data aggregation method and the 
much higher amount of work Wesabe made you do, it 
was far easier to have a good experience on Mint, and 
that good experience came far more quickly.  
#4: Get outcompeted
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The Top 20 Reasons Startups Fail
Everything I’ve mentioned — not being dependent on 
a single source provider, preserving users’ privacy, 
helping users actually make positive change in their 
financial lives — all of those things are great, rational 
reasons to pursue what we pursued. But none of them 
matter if the product is harder to use.”
Children’s apparel delivery service Mac & Mia found itself in a 
tough spot competing with highly successful companies like Stitch 
Fix and shut down only a year after its 2018 launch: 
“Mac & Mia faced a host of competitors in the children’s 
delivery box space, including the aforementioned 
Stitch Fix, which launched its kids clothing service in 
2018. Stitch Fix went public in 2017 and has a market 
cap around $2.7 billion. At least 20 other upstarts 
have launched similar delivery services for children’s 
clothes.”
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The Top 20 Reasons Startups Fail
A diverse team with different skill sets was often cited as being 
critical to the success of a company. Failure post-mortems often 
lamented that “I wish we had a CTO from the start,” or wished that 
the startup had “a founder that loved the business aspect  
of things.”
The Standout Jobs team wrote in the company’s post-mortem, 
“…The founding team couldn’t build an MVP on its own. 
That was a mistake. If the founding team can’t put out 
product on its own (or with a small amount of external 
help from freelancers) they shouldn’t be founding 
a startup. We could have brought on additional co-
founders, who would have been compensated primarily 
with equity versus cash, but we didn’t.”
#3: Not the right team
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The Top 20 Reasons Startups Fail
In some cases, the founding team wished they had more checks and 
balances. As Nouncer’s founder wrote, “This brings me back to the 
underlying problem I didn’t have a partner to balance me out and 
provide sanity checks for business and technology decisions made.”
At Zirtual, which was forced to lay off 400 employees overnight 
after a series of financial mistakes and miscalculations, co-
founder and CEO Maren Kate Donovan later admitted that one key 
mistake was not bringing a CFO onto the board: 
“If [a board] had actually been in tune, this would have 
been caught like six months ago… I blame myself on 
a lot of this, in not hiring more experienced people, 
but it wasn’t any maliciousness beyond just naivete… 
In retrospect if we had a senior finance person and 
a senior ops person it would have been a completely 
different story.”
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The Top 20 Reasons Startups Fail
Money and time are finite and need to be allocated judiciously. 
The question of how should you spend your money was a frequent 
conundrum and reason for failure cited by startups (29%).
As the team at Flud exemplified, running out of cash was often 
tied to other reasons for startup failure including failure to find 
product-market fit and failed pivots, 
“In fact what eventually killed Flud was that the 
company wasn’t able to raise this additional funding. 
Despite multiple approaches and incarnations in 
pursuit of the ever elusive productmarket fit (and 
monetization), Flud eventually ran out of money —  
and a runway.”
#2: Ran out of cash
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The Top 20 Reasons Startups Fail
In September 2019, augmented reality startup Daqri shut down after 
burning through more than $250M in funding and failing to raise a 
new round from investors: 
“Daqri faced substantial challenges from competing 
headset makers, including Magic Leap and Microsoft, 
which were backed by more expansive war chests and 
institutional partnerships. While the headset company 
struggled to compete for enterprise customers, Daqri 
benefited from investor excitement surrounding the 
broader space. That is, until the investment climate for 
AR startups cooled.”
European budget airline Wow Air met a similar fate; Chairman Skuli 
Mogensen wrote to employees: 
“We have run out of time and have unfortunately  
not been able to secure funding for the company…  
I will never be able to forgive myself for not taking 
action sooner.”
40
The Top 20 Reasons Startups Fail
Tackling problems that are interesting to solve rather than those 
that serve a market need was cited as the No. 1 reason for failure, 
noted in 42% of cases.
As Patient Communicator wrote, 
“I realized, essentially, that we had no customers 
because no one was really interested in the model 
we were pitching. Doctors want more patients, not an 
efficient office.”
Treehouse Logic applied the concept more broadly in their post-
mortem, writing, 
“Startups fail when they are not solving a market 
problem. We were not solving a large enough problem 
that we could universally serve with a scalable solution. 
#1: No market need
41
The Top 20 Reasons Startups Fail
We had great technology, great data on shopping 
behavior, great reputation as a though leader, great 
expertise, great advisors, etc, but what we didn’t have 
was technology or business model that solved a pain 
point in a scalable way.”
Kolos was direct about its biggest mistake: 
“With Kolos, we did a lot of things right, but it was 
useless because we ignored the single most important 
aspect every startup should focus on first: the right 
product.”
A month after Paul Graham, Jessica Livingston, Trevor Blackwell, 
and Robert Morris started the Y Combinator seed accelerator in 
2005, they picked “make something people want” as their motto.
Our study shows that failing to do this is one of the easiest ways 
to guarantee startup failure.
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has the underlying data 
included in this report
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