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Why 11 out of every 12 startups fail

While headlines focus on billion dollar startup acquisitions, mergers and millions in quarterly revenue, it is extremely rare that a startup makes it to that level, in fact, most are total flops. According to the Startup Genome Project, there is a reason for this.

The challenge of scaling properly

Consumer-focused startups abound in today’s business world. Many of the business owners are serial entrepreneurs because their previous business ventures were not as successful as they had originally hoped, or that they’ve have another great business idea. However, one problem with the modern startup is that only one in twelve startups actually succeeds, according to The Startup Genome Project, which are obviously challenging odds. The main problem has been pinpointed to the rate of premature acceleration, or scaling.

Many comparisons can be made between the successful and unsuccessful startup. One of the most interesting, and perhaps telling comparisons is the success rates of startups who offer free products and those who offer paid products. To start off, The Startup Genome Project defined two key terms needed to understand their findings—the “consistent” and “inconsistent” startup.

The Inconsistent Startup

This type of startup means that the company has moved to expand and aggressively market their business prematurely. Doing so usually means the startup skipped the crucial step of refining the business model based on validation and feedback from interested parties. Instead of perfecting the business model, a company decides to move forward without fixing all of the glitches.

The Consistent Startup

On the other side of the spectrum is the consistent startup. This simply means that the startup scaled their marketing and output efforts effectively and at a steady rate. The consistent startup takes a more reserved and systematic approach to the growth of their business, because they want to make sure they have a stable foundation on which to build and grow the business.

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Comparing the two:

The Startup Genome Project published the following percentages:

  • consistent startups have 50% more users who paid for products than the inconsistent startup.
  • 23% of consistent startups who offered free products have over 100k users or customers.
  • 99% of inconsistent startups with free products never break the 100k mark.

The takeaway lesson for startups

So, how does this apply to your startup? Perhaps the most important lesson learned is that consistency is key. Building and improving your startup consistently will help you to retain the interest you already have in your business and then you can add to it at a healthy, steady rate. While you may have expected the startups that offered free products to succeed over those that offer paid products, it simply isn’t the case.

Startup success has more to do with providing a great, useful product while slowly building steam and marketing efforts. This way, you’ll have a steady, stable following that will be there to celebrate with you once you’ve ironed out all the problems in your business model.

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Written By

The American Genius Staff Writer: Charlene Jimenez earned her Master's Degree in Arts and Culture with a Creative Writing concentration from the University of Denver after earning her Bachelor's Degree in English from Brigham Young University in Idaho. Jimenez's column is dedicated to business and technology tips, trends and best practices for entrepreneurs and small business professionals.

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  1. Pingback: Understanding and Beating the Odds of Startup Failure « Annotary Blog

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