Debunking the Startup Failure Myth & How To Overcome 3 Common Obstacles to Success

startup success For entrepreneurs, “failure” feels like a curse word. We wince and often retreat in fear of it. When people think about startups, the word failure isn’t too far back in their minds. I myself often cite the age-old statistic that peppers headlines, confidently claiming 90% of startups are doomed to die.

And I’m not alone. In an op-ed for Fortune, business journalist Erin Griffith admits, “I carelessly repeat a statistic that I’ve heard dozens of times in private conversations and on public stages: ‘Nine out of 10 startups fail.’” The problem, she says, is that the data actually proves otherwise. In a study conducted by Cambridge Associates, researchers found that the real failure rate hasn’t gone above 60% since 2001.

According to Griffith, the 90% failure myth serves to soothe the bruised egos of those startup founders who failed. To mitigate its paralyzing effects, failure is fantasized as the norm. “But startup failure isn’t a natural law like gravity,” says Griffith.

A more productive way to view this pervasive narrative is to give it a new purpose. What if, instead of a scapegoat, it served as a motivational tool that drives eager entrepreneurs to be more thoughtful and prepared for the real challenges they will face?

It remains true that a majority of business ventures never reach their full potential, and there are real reasons why. So, if we spend more time analyzing and strategizing against those challenges, rather than replaying the negative myths, we can start improving rates of success.

Challenge 1: No Need in the Market

A report from CB Insights found that the most common and significant challenge is in the market. As entrepreneurs, the task at hand becomes creating the market need even when there isn’t one. Become a market disruptor.

A perfect example exists in the underwear industry. How unnecessary is yet another underwear product in an US$8-billion industry? For Tom Patterson, CEO of the men’s underwear startup Tommy John, disrupting a saturated industry meant solving problems people came to believe they just had to live with.

“In 2008, I was a medical device salesman frustrated with the fabric, fit and functionality of my undergarments,” says Patterson. “I wanted to find a better solution, so I created one. All of our products have been designed to uniquely solve problems.” Their flagship men’s underwear product, for example, touts a horizontal fly, odor/moisture/wedgie-resistant fabric, and a waistband that won’t slip.

SOLUTION: To disrupt a market, look for common problems or pain points that remain unsolved.

Challenge 2: Unsustainable Funds

Another common challenge startups face is simply running out of cash—or not knowing how to sustain a cash flow that will support growth. Management must know how to achieve a series of milestones that lead to positive cash flow, from the seed round to proving the business model.

To achieve longevity in a competitive market, slow and steady really does win the race. This may mean making the difficult decision not to rely on venture capitalist funding, which can cause overwhelming growth spurts and often a loss of vision. Getting caught up in evaluating your business by its valuation will distract your focus from what matters most: perfecting your product and understanding your customers.

As you grow, you’ll be presented with opportunities for partnerships, funding and even expansion into other categories. As the founder, you need to be incredibly selective in what makes sense for your business in the long run.

SOLUTION: Stay focused on your product and customers, not large funding rounds that can’t guarantee longevity.

Challenge 3: Working With The Wrong Team

While things like hustle, determination, understanding and genuine love for the product and brand are critical, so is a team with a diverse set of skills and personality traits that work to balance out efforts.

It’s common for founders to look for more people like them, but this can prove disastrous. While recruiting employees who will mix well with your culture is certainly important, be careful not to stack the deck too far on one side or the other. As part of the CB Insights report, one founder wrote, “My underlying problem was I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.”

SOLUTION: Create the right mix of people who can come up with innovative ideas and people who know how to execute on those ideas.


Shannon Burns for Tommy John Shannon Burns is the community manager at Tommy John, a menswear brand. Follow her and the rest of the team on Twitter, @TommyJohn.

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Categories: Best Practices Entrepreneurial Journey FINANCES Goal Setting STARTUP


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