Among 101 shuttered startups that recently opened up about why they failed, a bit less than half of them cited a pretty basic reason: there was little to no market need for their offering.
That’s according to a new CB Insights analysis of startup “post-mortems,” 101 of which the firm had included in a well-read post earlier this year.
Running out of cash (29 percent), not having the right team (23 percent), and getting beat out by competition (19 percent) were the other top reasons. (Many startups gave multiple reasons for failing, so the percentages involved don’t add up to 100 percent.)
However, the lack of a market need—aka, a “solution looking for a problem,” (42 percent)—may be the most telling and instructive one on the list. It suggests many people are starting companies without doing their homework first; in some cases, people may even be starting companies just for the sake of starting companies, or going after minor problems just because they’re “interesting.” Via CB Insights:
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. We had great technology, great data on shopping behavior, great reputation as a thought 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.”
Image of a car wreck via Shutterstock.
Kyle Alspach has worked in journalism in Massachusetts since 2005 and was one of the original staff writers at BetaBoston.
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