Almost two-thirds of Americans want to start a business. Just take a spin through Inc.com and you'll see no shortage of startup success stories and multimillion-dollar exits. Pair that with the recent Great Resignation, and you have a recipe for an entrepreneurial heat wave, backed up by the record-breaking 5.4 million new business applications filed in 2021.
But all of these new founders will likely come to learn what experienced founders already know: Most startups fail. I learned that lesson myself. When I was 29, I was a millionaire with my own set of successful startups. But two years later, I was basically broke, having lost more money than the average American earns in a lifetime. Since then, I have both rebuilt my fortune, lost some hair, and spent some 15 years as an avid student of why companies fail and--equally interesting--how to avoid it.
For my new book, How to F*ck up Your Startup, I interviewed numerous founders and compiled a database of more than 160,000 failed companies to analyze their failures and fixes. Spoiler: Most companies don't fail because they run out of money. A deeper analytical dive typically reveals other reasons for failing: a dysfunctional founding team, a poor business plan, or perhaps just a flawed product-market fit. Read on for more insight, and learn how to avoid f**king up your startup.
Study failure, not success
The media's description of startups often gives a distorted image of what success looks like: a 23-year-old college dropout, armed mainly with passion and a do-or-die attitude toward his (not her, since female entrepreneurs are often neglected) first unicorn-size company.
This is of course wrong and dangerous. Instead, founders need to think about building a startup like running a marathon--but through a minefield. An exhausting hell on earth, where you will most likely make some disastrous missteps.
As a founder, you need to focus on dealing with the day-to-day challenges--the mines--instead of focusing on an outsize exit at the end of the race.
I have made it my focus to map out the location of those mines. In my book, I take the reader through the life cycle of building a company--including discussing the founders' attitude, business models, funding, organization, sales, and other aspects. In total, I've identified 62 mines to avoid, and one of my favorites is the Problem-Less Solution.
Focus on problems before solutions
I've often seen founders starting with their great passion or idea--their fantastic solution--instead of an actual problem. They then spend forever (and all their funding) trying to find problems to match their solution--which of course ends up being the real problem.
A great example is Quibi, a billionaire-backed startup that wants to be Netflix for phones, while claiming not to compete with Netflix, TikTok, or YouTube. There were several reasons why Quibi failed. Honestly, I liked the company's solution--but it completely forgot to solve the problem. It had a weird 10-minute-ish video format, for which it wanted to charge $5 per month. But let's get real for a second: What consumers want to switch from Netflix to Quibi? None. Why pay more money each month for another app when you can already get Netflix's content on your phone?
Despite nearly $2 billion raised and hordes of Hollywood talent, the company survived less than one year, and folded in 2020.
The fix for this failure? Focus on tier-one problems--pain points compelling enough to warrant a solution at scale. Think about a better headache pill, not a better vitamin pill.
Go make a great startup
There are of course several other mines you can step on--at least 61 more in my book. But at the core of the book is the idea that founders need to focus on problems first, and focus on the boring metrics, like stable profits. I wish you success--and would love to hear your story, either way.