top of page

Entrepreneurs fess up: the key reason why their promising startup crashed

Updated: Jun 1, 2022

A few months ago, we published a post on five reasons why startups fail. People don’t like to talk about it, but startups, or early stage technology businesses are risky. Statistically, 9 out of 10 startups fail.

Of course, it is hard to pinpoint one specific reason or event that causes the failure, but recently we found CBInsights’ roundup of startup post-mortems very revealing. Plus, it’s always good to hear it directly from the entrepreneurs.

After closely reading through the post-mortems, we were struck by how many startups failed because they either had trouble finding product/market fit or because they ran out of money before they could do get there.

It’s worth noting that all of the companies profiled were once promising startups. The median average amount of funding raised by these startups who met an untimely death was $1.3M.

We’ve talked about the importance of product/market fit before, but here a few interesting quotes from some of the entrepreneurs profiled by CBInsights.

Product: Kolos

“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.”

Product: RewardMe

“Don’t scale until you’re ready for it. Cash is king, and you need to extend your runway as long as possible until you’ve found product/market fit.”

Product: Treehouse Logic

“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 a business model that solved a pain point in a scalable way.”

Company: GroupSpaces

“We most definitely committed the all-too-common sin of premature scaling. Driven by the desire to hit significant numbers to prove the road for future fundraising and encouraged by our great initial traction in the student market, we embarked on significant work developing paid marketing channels and distribution channels that we could use to demonstrate scalable customer acquisition. This all fell flat due to our lack of product/market fit in the new markets, distracted significantly from product work to fix the fit (double fail) and cost a whole bunch of our runway.”

Everyone wants a happy ending, but not everyone gets it in startup land. Read more cautionary tales from CBInsights: 135 Startup Failure Post-Mortems. Others’ mistakes can be valuable lessons for you!


bottom of page