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What do you think are the most common symptoms that a startup will fail?

Jeff Andrews's Profile

Answers

Topic Expert
Kent Thomas
Title: Founder
Company: Advanced CFO Solutions
(Founder, Advanced CFO Solutions) |

There are several but some of the most common are: failure to really understand & talk to their customers (i.e., an idea looking for a market vs. a product designed to satisfy a real market need); Founder's inability to admit what they don't know & to seek competent advice; Spending money excessively or ineffectively combined with poor accounting of results and cash flow; Inability to forecast or failure to raise sufficient capital.

Ernie Humphrey CTP
Title: CEO & COO
Company: Treasury Careers
LinkedIn Profile
(CEO & COO, Treasury Careers) |

You can look at the company's messaging and marketing and get a real sense of whether a business really understands its addressable market. If the company's value proposition and market positioning are poor then a business will ultimately fail. Also, if a company is constantly switching its senior leadership, messaging and marketing approach then this is a bad sign. The caveat here is that an innovative product or service can mask the signs of business that will not last.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I agree with Kent; owners that robbing the company of working capital generally will fail eventually.

Also in the SMB and Start-up marketplace, Founders/Owners don't listen to advice; especially if they smell success (because if they have success, they must know all).

Gerard van Stijn
Title: Head of Finance
Company: Simon Lévelt B.V.
(Head of Finance, Simon Lévelt B.V.) |

A failure to keep an eye on the cash and the cashflow. As well as not being able to control the costst. However, there are many symptoms. Too many actually to list in a short post.

Dabney Wellford
Title: CFO
Company: Wellford Consulting
(CFO, Wellford Consulting) |

Let's not forget management which intentionally lies to and misleads the Board of Directors. Many times, the entity is under-capitalized and there is little to no understanding of how venture capital works at the ownership levels. Also be wary of CEOs and sales people who set unrealistic expectations with customers and underprice product or give it away.

Violet Althage
Title: General Manager
Company: Nanco Electric, Inc.
(General Manager, Nanco Electric, Inc.) |

Short - Sweet - To The Point: I believe success lies within the following. Without these six priorities success is difficult at the best. 1) Adequate Capital/Funding 2) Committed Management w the Highest of Integrity 3) Dedicated Employees that have their priorities straight i.e. God-Family-Job and not simply oneself 4) Communication - 2-way - at all times 5) Attainable Goals 6) Constant Strategy/Plan of Action - accomplish - monitor - amend

John Argo
Title: Consultant
Company: Independent Advisory Services
(Consultant, Independent Advisory Services) |

One of the primary indicators is whether a given management team has the relevant industry expertise and the demonstrated ability to execute. The ability to execute and the experience to know when/how to pivot--in a startup world--dominate everything else. Too often, founders overestimate their ability to execute at a high level and wait until too late to bring in needed expertise. It's a bit of you-don't-know-what-you-don't-know. Some founders learn and deliver. Others bring in (or their investors bring in) people who can execute. The rest fail. I've been involved with brilliantly experienced executive teams that failed because they were all vision, no execution. They knew everyone in the industry and how everything works. They just could not actually roll up their sleeves and do the 80% of the work that does not involve brilliant thinking. In a startup, there is no job beneath the CEO and if the CEO is not willing to "scrub the toilets" when they need scrubbing, then it's not an execution-oriented CEO. Capital is very much secondary to this.

Topic Expert
Dana Price
Title: Vice President, M&A
Company: McGraw Hill Education
(Vice President, M&A, McGraw Hill Education) |

1. team- don't have the right folks
2. market- don't understand size of market, addressable market, etc.
3. product- can't get the right product to the right people

Anonymous
(CFO) |

All are good points. The best advice I ever got from one of Silicon Valley's most successful VC's was when I was involved in my first venture backed company: "The BOD is very critical and it most important that the members are right for the respective venture. The biggest reason most start up companies fail is the wrong BOD."

I have experienced all of the above and nothing has rung more true is the wrong BOD (read into that the venture firm they represent)..

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Interesting that many of the answers include a Board as part of the problem.

For the most part, almost all the start-up's I've seen and small businesses (until they really start to grow and hit a critical mass) don't have either a Board of Directors or Advisors. (I discount the company attorney and CPA, and possibly the banker; if they are old school; as board members).

I must admit that many of the companies I've seen do not have VC/PE/IPO in their future.

Topic Expert
Paul Benedetto
Title: CFO, Director of Finance, Consultant
Company: Nextwave Software, Rethink Fabrics
(CFO, Director of Finance, Consultant, Nextwave Software, Rethink Fabrics) |

Very good insights here and agree with the volume of comments related to Board. Having the right advisors on your Board; making sure that some of them are independent and experts in your industry is key. Also, be wary of your investor profile - VC/PE partners that are not the right for your company can do more harm then good, especially when they have voting power though the Board.

Cash of course is ALWAYS the most important factor - having enough runway and then managing what you have wisely.

Also, extensive research on your target market(s) and then continually test your product for acceptance. Do not think "build it and they will come". Instead, go after the MVP (minimum viable product (or service)) and then iterate off of that.

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