THE STARTUP GENOME PROJECT ANALYZED 3,200 HIGH GROWTH STARTUPS AND DISCOVERED WHY 1 OUT OF 12 FAIL

Startup Genome analyzed 3,200 high-growth technology startups to answer this daunting question:

Why do startups fail?

It came away with this beautiful, informative infographic:

Click Image To Enlarge

COMMENTARY:    Here are some of the key finds from the Startup Genome report:

1. Founders that learn are more successful. Startups that have helpful mentors, track performance metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.
2. Startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all. A pivot is when a startup decides to change a major part of its business.
3. Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves. Startups can prematurely scale their team, their customer acquisition strategies or over build the product.
4. Many investors invest 2-3x more capital than necessary in startups in the discovery phase. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.
5. Hands-on help from investors have little or no effect on the company’s operational performance. But the right mentorssignificantly influence a company’s performance and ability to raise money. However, this does not mean that investors don’t have a significant effect on valuations and M&A.
6. Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.
7. Business-heavy founding teams are 6.2x more likely to successfully scale with sales-driven startups than with product-centric startups.
8. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups without network effects than with product-centric startups with network effects.
9. Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.
10. Founders that don’t work full-time have 4x less user growth and end up raising 24x less money from investors.
11. Most successful founders are driven by impact rather than experience or money.
12. 72% of founders find out that their initial intellectual property is not a competitive advantage.
13. Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.
14. Startups that haven’t raised money overestimate their market size by 100x and often misinterpret their market as new.
15. B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the dynamics of customer interaction. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time requirements, market risk and team composition

Startup Genome Report: premature scaling v 1.1 . Copyright 2011, contents under creative commons license

Courtesy of an article dated June 15, 2012 appearing in Business Insider and an article dated September 1, 2011 appearing in BrilliantForge.com

Comments

[J Honhanse]

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