Let’s start with some startup failure rates as compiled by the Bureau of Labor statistics (BLS):

  • 79.6 percent made it one year (2017).
  • 68.8 percent made it two years (2018).
  • 61.2 percent made it three years (2019).
  • 54.3 percent made it four years (2020).

Now let’s couple these with a report from CB Insights, providing top 12 reasons for why startups fail. Putting the number 1 reason (Running out of cash at 38%) aside for a moment, it’s interesting to see that 35% of companies fail due to “No Market Fit” at 35%

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Going back to the stats from BLS and doing a correlation with the CB Insights reports, it can be deduced that as the firm starts maturing, the flaws start becoming amplified. A flawed business model (19% of failure), will inevitably cause price/cost pressures (15%), which could be a byproduct of either:
A) Lack of good understanding of competition (20%)
B) Poor mistimed / poor (10% & 8% respectively)
As pressures continue to mount and runway (cash) disappearing, team/investor (7%) harmony will go out the window as it will become a survival game. This is unfortunate, albeit true. 

To mitigate these, founders need to start with the basics, as follows:
  1. Do your research and before putting anything in motion, fill out the business model canvas (BMC). 
  2. A crystalized BMC will ensure that there is potential in the idea. Then move to filling out a financial model (not the same as a business model). This will provide an idea of the runway needed from inception to turning profitable. 
  3. Once this is in place, then move to a detailed business plan, which is a double-click, or a detailed view of the BMC.
  4. Use the experiment model to stress test the feasibility in the real-world, through a Minimum Viable Product (MVP)
  5. Finally get ready to scale and pivot.
  6. Failure is not the end, rather the beginning of the next venture.