- Startups have a 99% failure rate.
We all know this.
This is not shocking to anyone,
any one of us that are founders.
But that's not why we do them, right.
It has a high failure rate, but it also has high rewards.
And we know that there's a 1% chance
of whatever we're working on
will actually amount to something.
There are different things that we can do
to reduce execution risks,
and make sure that we're successful,
but it's still under that 1%, right?
So, how do you actually learn from past startup failures?
Could we do that?
Could we actually not repeat the same mistakes,
and maybe increase our chances of being part of that 1%?
In this episode, I'm gonna dig into
the top 10 startup failure reasons,
and go through what each of them are,
and walk you through the one big lesson to learn
from those top 10 reasons.
Intro.
(funky music)
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What's up everybody, welcome to "Unstoppable."
I'm TK, and on this channel, I help SaaS founders like you,
grow your SaaS businesses faster.
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Be sure to hit the subscribe button, and that bell icon,
that way you'll get notified every single time
I drop an episode, that helps you grow your SaaS business.
If you're already part
of my SaaS go-to-market coaching program,
if you're part of this community, welcome back.
It's really great to see you over here.
Seriously, I love you guys.
We just hit 5,000 subscribers, (people cheering)
and I'm just, thank you, like seriously,
thank you for being part of this community.
I truly love you guys.
This is, I enjoy this.
Okay, so today I wanted to talk about startup failures,
and what we can learn from them.
Now, none of us, none of us SaaS founders,
we don't do startups because they're easy.
They're certainly not the easiest way to make money.
They're not the surest way to make money.
There's a whole bunch of ways to make money,
like that's not it.
I don't know about you, but I do this
because in a way, it's my calling.
I tried doing other things, and I was miserable.
But whenever I'm building companies,
going after, solving a very big problem,
when I think about the upside of that,
the failure rate doesn't bother me.
I know the failure rate, but I'm just like,
it doesn't matter, I'm gonna be part of that 1%.
I'm going to do everything I can to actually succeed.
Right, that's how we're wired.
It's weird. This is rare.
And that's why I think,
when you put a bunch of SaaS founders in a room,
or a Zoom call, we all get along that much more,
because we're all equally passionate and crazy.
Just frigging crazy about this.
So, the question becomes,
how do we increase our chances of succeeding?
One of the reasons I run
my SaaS go-to market coaching program,
is to reduce execution risk,
meaning we know the set of things that need to be done
to build a go-to-market machine.
If you work with us, and we've done this before,
we can actually reduce the risk of miss executing.
So that's one way you can actually reduce the risk,
and the failure rate.
The other thing you can do
is you can actually take some time
to learn from past mistakes.
Success and failures, leaves clues.
And if we can learn from them,
then that could be very powerful.
Generally, I don't know you, but we generally don't do that.
The reason we don't do that is we're very quick to say,
and get arrogant, and so that's on us.
I'm gonna make those mistakes. We're not stupid.
That person was stupid.
But the reality is that's not true.
And so, today I'm gonna go walk you through
the 10 top reasons that startups fail.
I came across this CB Insights research,
and CB Insights is amazing, I'm a huge fan.
I should probably subscribe to them.
I look at their stuff often enough.
I love their emails.
And so they did this research,
and they looked at 101 startup postmortems,
and they figured out the top 20 reasons start-ups fail,
all top 20 reasons.
Now, I don't wanna go through all top 20 reasons,
because I don't think it's gonna be as valuable,
because I looked at them.
What I'm gonna do is look at the top 10 reasons.
I'm gonna walk you through each of them.
And then I'm gonna walk you through
the one thing that I learned
from looking at these top 10 startup failures,
and what you can do
to actually increase your chances of succeeding,
for your SaaS business.
So, if you're excited to dig in,
go ahead and smash that like button,
for the YouTube algorithm, and let's start first
and go through the reasons.
Okay, so why does startups fail?
This slide is actually,
it's right out of our SaaS growth strategy guide.
So I printed it out, and you can grab a copy of it.
It's completely free, I'll link to it below.
The reasons that they cited, so number one was
there was no market need, right?
No market need is a number one,
they analyzed 101 startup postmortems,
and CB Insights found like the number one reason
that was cited was no market need.
42% of startups, out of this 101,
actually said there was no market need,
meaning they built a product, maybe they raised some money,
assembled a team, went out there, worked at it,
and then realized the market didn't care.
Like, literally the market was not interested
in what they were building.
So, that's the number one reason.
The second thing was they ran out of cash.
That's self-explanatory,
you gotta manage your runway, as a founder.
Like, you just need to do that.
Number three was not the right team.
Oftentimes when I see not the right team,
what it really means is they picked a market to go after
the team wasn't built for.
That team didn't have the domain knowledge.
They weren't equipped enough.
And again, you'll start to see these connect,
the not the right team meant,
like they went after the wrong market,
and maybe built the wrong product, right?
They just weren't built appropriately.
The next one was they got out competed.
The competition was too high.
In the market, they just weren't relevant.
They didn't find a way to stand out,
and uniquely position themselves.
Their pricing was off, or their costs,
they had cost issues, meaning they couldn't be competitive
in the market, in terms of the product that we're selling,
and the problem that we're solving,
the business value they we're delivering.
User unfriendly product, the product just sucked.
I love their description of this one.
By the way, I'm gonna go pretty quickly
with the top 10 reasons,
because really what matters the most
is the pattern of the top 10, and we'll get to that.
User unfriendly product is like their product was shitty.
And I do commend the guys at CB Insights,
for being, I don't know, politically correct on this,
but the product was shitty.
Like, in fact, we're just gonna rename this, shitty,
- [Poo Emoticons] Wee!
- Product.
That's literally what that was.
Then it was product without a business model, right?
They didn't, they had a product and maybe users loved it,
and their free plan was off the charts and bananas,
but there was no business model.
They literally could not find a way to make money.
And then they ran out of cash,
and they couldn't figure out their pricing.
Like, you can see how these connect.
So, product without a business model.
Poor marketing, 14% of companies said
they were poor at marketing.
And that also, you can see it connects, like right?
It's like, okay, they did a bunch of marketing activities.
They hired a content person, and blogged,
and that's all they did.
And nothing happened, like literally there,
then they were like, "There's no market need,"
and they run out of cash.
That happens all the time, I see it all the time,
with new founders.
And then lastly was ignore customers.
This one, I like a lot, and I don't think this one,
so all of these are connected,
and we'll talk about how they're connected.
This one, I think is really interesting, ignore customers.
I think that all of us are guilty of ignoring customers.
And what I mean by that is when we start a company,
and we build a product, we go in with a high conviction
on this is the problem, and this is the solution.
Give you money. You need this.
And a lot of times in the market,
what'll happen is people will use the product,
but they'll describe it differently.
They'll use a different part of it.
They may use it for a different problem.
And sometimes we get rigid, or like, "No, no, no,
That's not what this is for.
We're here to revolutionize the world.
You're trying to just use this for this dumb thing."
And we don't recognize that sometimes in the early stages,
the true product market fit looks dumb, looks small,
looks like a toy, and we ignore customers.
We don't listen to them.
And so I think this being number 10,
did you get, one, two, three, four, five,
six, eight, nine, nine, where's number 10?
I must've cut that off by accident.
Product mistimed is number 10.
We'll put this over here.
Product mistimed is number 10.
I think that's fine, Like yeah, it wasn't the right time.
I get it, I think that's a good one too.
I don't think it's as interesting.
But I do think ignore customers even.
So, those are the 10, all right.
No market need, ran out of cash,
not the right team, got out competed,
pricing, cost issues, shitty product,
product without a business model, poor marketing,
ignore customers, product mistimed.
What can we learn from this?
Right, like that's the question.
These are kinda connected, you can see,
but there's enough data underneath this,
with 101 startup postmortems.
And there were like, "These are the top reasons."
The number one being no market need, which is crazy.
They're like, "We did all this stuff, but no one cares,
like literally, the market doesn't care."
So here's what I got out of it,
and this is why I wanted to do this video,
and here's what we can learn, okay.
What we can learn, and I talk about this a lot,
in this channel, is there's three pillars
to every SaaS business.
You have the product, which we all over index on,
like we all over index our product,
because we do this because we care about product,
we're builders, right?
Then you have the market, and then you have go-to market.
And if you're going to win as a company,
you need to find the trifecta, the thing in the middle.
And that's where the money is.
I talk about this all the time, in this channel, right?
And so we tend to over index on product,
and not enough on market, and go-to market.
But, here's the truth, and this is the proof of this,
you can have a phenomenal market, and a mediocre product,
and you will still win.
You can have a phenomenal market, and a mediocre team,
and a mediocre product, and you will still win,
because the market forces will be so strong.
However, on the other side, you can have an amazing product,
an amazing team, if the market's not right,
then there's gonna be no market need.
You're going to run out of cash.
You're gonna get out competed,
because others meet the market needs in a better way.
You're not gonna know how to price it.
You won't have a business model.
Your marketing will be crappy,
and you won't even listen to your customers,
because they'll say, "Hey, you're kind of close,
but we don't want this."
And you were like, "No, no, no,
here's the thing, it's revolutionary."
So that's the biggest thing you can take away.
And so what do you do with this, right?
So if great businesses are built
on market, product, and go-to market,
and if you look at here's where I would pause it.
When I look at this data, what sticks out to me
is that we, as startup founders,
screw up product and go-to market, more than anything else.
There's only one line item here, on shitty product.
Everything else was a market, or go-to market problem.
It was either a market problem,
where the TAM wasn't there,
it wasn't an urgent and important problem.
It wasn't priced properly,
compared to the business value you're describing,
or people just didn't get awareness of it,
to use this product.
These are the big ones that are really sticking out.
That's the big learning to be learned.
Now, what do we do about this?
So there's a core principle that I would apply,
that you can apply, that you can learn from.
But before I do, let me just pause here for a second.
There was two ways I could have done this video.
One way I could have done this video
is create those road crash videos,
where this startup Quibee raised $40 billion,
and shut down after three years, and couldn't turn a dollar.
They're kinda sexy to watch, but it's useless.
We're not gonna learn anything from it.
So I'm like, I'm not going to do the 10 startups
that wildly fail, 'cause that's boring for me,
and useless for you.
So I'm like, let's go look at the data.
So that's why I pulled together
the best analysis I could find on startup postmortems,
that aggregated the results, and gave me their top 10 list.
So this is super powerful.
And there's one thing I think we can take away from this,
and I'll get to that principle,
but before I do that, let me just pause here for a second.
If you're starting to see the power in this,
you're starting to see market, product, go-to market,
if you can start thinking along those three lines,
and think about them separately,
how you can actually be wildly successful,
how you can be a lot more successful
in building your SaaS business,
if you can, be sure to smash that like button
for the YouTube algorithm.
And can I just get a yes in the comments below,
so that I can hear from you?
It just means a lot to me and my team,
when we see comments from you.
Honestly, I don't know how else to say it.
I don't wanna fake a way to like,
"If you wanna talk about this,
put this in the comment."
I just wanna hear from you, hit yes, it just means a lot.
Also, if you're building out your SaaS business,
and you want a framework to follow,
to ensure you can grow, and build a strategy,
be sure to download my SaaS growth startup strategy guide.
It has this slide in there too,
so you can take a closer look, I'll link to it below.
But let's go into the principle number three.
So principle number three,
is this is the thing that I think we all need to embrace.
And we know this, I know you know this,
but you may not be taking action on it.
The biggest thing that matters
is distribution.
Distribution trumps everything.
I really need to order some new markers.
Distribution trumps everything.
So, if before you get too deep on your product,
and before you get trapped in that one more feature trap,
what you really need to do is make sure
you're in the right market.
Are you solving an urgent and important problem?
Is the market sufficiently large enough?
Will the market have budget to spend the money,
to solve this problem?
Answer that question.
If you can, you will make sure that you actually become
that 1% of startups that actually succeed.
And you will overcome this first question.
This first reason that startups fail, why 42% of them fail,
they just pick the wrong market.
They just, they didn't have the market.
So first principle is why,
is it an urgent important problem?
Do they have budget?
Are they willing to take action?
Figure out whether you have a proper market strategy or not.
That is the first thing you can learn
from these startup failures.
The second thing is make sure you have
a proper go-to market strategy.
Now, obviously I'm biased.
A go-to market is everything.
I'm a go-to market person.
I started as an engineer, I oriented some product.
I learned the hard way, and I learned,
go-to market is everything, and distribution is everything.
But you need to have a go-to market machine.
You need to have a go-to market strategy.
It needs to make sure that it has the right messaging,
the right positioning, the right pricing,
inbound, outbound, all bound.
All of those things need to be lined up, and executed on.
And there's billions of hours of free advice out there,
but you need a framework to follow.
And so you need to make sure
you have a proper framework to follow
for your go-to market machine.
When you have a go-to market machine,
then you will know how to compete.
You'll know how to price your product.
You'll know what your business model is.
You'll market it properly.
And you will actually listen to your customers,
and feed it back.
When you actually have a go-to-market machine,
and you're having customer conversations,
then you're actually gonna be able
to build a better product,
because you're not gonna be in a silo anymore.
So all time, no matter what stage you're in,
you should be building a go-to-market machine,
and making sure that you are talking to customers,
and building the product for them.
And, you're actually building up the business model.
You're evaluating whether it's an urgent
and important problem,
and you're informing your market thesis.
So this is the trick, if you build out the market piece,
and don't ignore it,
then you'll overcome the first reason why
all these startups failed.
If you build out your go-to market machine,
then you will address the rest of these.
Now, if you do these two things,
and you still have a shitty product,
you still stand a chance at success,
because the market will still reward you.
They'll be patient with you.
They're like, "Well, this is the best product we got.
It's still shitty, but at least it solves the problem,
to a certain extent."
Believe me, that's what happens.
But if you don't do these two things,
it doesn't matter how great your is, it won't matter.
No one will know, and you'll eventually run out of cash.
So that's why I wanted to do this video.
And hopefully you liked the approach that I took.
Start with data, look at the key reasons,
distill it down to the two key things that matters the most,
and what you need to focus on.
What you need to focus on is building out a market strategy,
a go-to market machine, and then use those two things
in the interaction with your customers,
to actually build out your product.
You do that, whether you're at a million ARR,
sub million ARR, or 3 million, 10 million,
20 million, 50 million, you just need to keep doing that.
That's the trick. That's the pro tip.
And this is not like some shortcut, it's hard,
but those who do it end up being the 1% that succeed.
That's it, and that's the big lesson to learn.
If you got value from this video,
be sure to smash that like button,
for the YouTube algorithm.
If you wanna dig more into this,
go download our SaaS growth strategy guide.
It goes deep into how to build out a go-to market strategy,
a market strategy, and a product strategy.
Go to getunstoppable.com/strategy.
It's completely free, all our key resources, all in there.
Includes a one page strategy template, you'll love it.
Go fill it out, you will make the biggest difference
in your startup, so go download that.
I'll also link to it below.
If you're new to the channel,
I drop a video like this three times a week.
This is good, I really think this video
is one of our, gonna be one of our best,
but hit the subscribe button, and that bell icon.
We'd do three videos a week.
And we put so much into these
to make sure you're successful.
Share it with a friend, your team.
They will get value from this as well.
Think in terms of market, product, go-to market.
That's what makes the biggest difference.
And lastly, if you want help with this,
if you want a proven framework to follow,
if you want coaching on this,
check out my SaaS go-to market coaching program.
Tkkader.com/gtm, I'll link to that below as well.
And lastly, lastly, lastly, lastly, remember,
everyone needs a strategy for their life,
and their business, but when you are with us,
yours is gonna be unstoppable.
I'm TK, and I'll see you in the next episode.
(happy music)
(beeping)
Constantly paranoid that it's not recording.
It's recording, cool.
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