Why Most Startups Fail (And What You Can Learn From It)



Do you think you learn more from a successful startup or from a failed startup? originally appeared on Quorathe place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Michael Wolfe, Founder of Five Startups, on Quora:

Most startups fail.

Most fail because they do not reach product/market fit. When a company launches a product that has never existed before, they have no way of knowing for sure if customers will find the product compelling, will pick it over the alternatives, or will pay enough for it to produce a profitable business. In most cases the answer is “no.” Predicting the success of a new product is very hard in any industry.

Other startups fail because of execution problems. Most startups are underfunded, staffed with inexperienced people, have no brand equity, and are constantly racing the clock trying to keep the wheels on. Most run out of time and disband.

This means that the startup world is full of people who have failed. Most founders will live through their company failing, and even those who succeed often suffer a few failures before they have a breakthrough.

Most of these founders will tell you a few things:

  • You have to be willing to risk failure to start a company, even though you should fight like crazy to avoid it.
  • Failure usually isn’t as bad as you thought it would be — you will not be blackballed from the industry, and your life will not be ruined. People will barely notice.
  • You will learn a lot. Startups are intense experiences that result in rapid learning. Even if they fail, you’ll be armed with new experiences you can roll into your next project.

This attitude is both healthy and realistic, but it can be taken too far. The industry’s acceptance of failure can often be misinterpreted as fetishizing failure — even suggesting that failure can be more rewarding than success.

No way. Failure is painful, often wasteful, and will almost always teach you less than success will. Founders dread it and work to avoid it. It is also not the only way to learn: learning from other people’s mistakes is far preferable to learning from your own, and there is no shortage of podcasts and blogs full of founders telling failure stories to learn from.

If you start a startups that succeeds instead of fails:

  • You’ll go through all of the phases of startup growth: putting together a founding team, raising money, building a product, getting happy customers, recruiting executives, managing a board, and keeping the team and culture intact. A successful startup gives you the chance to learn all of these, but an unsuccessful startup usually doesn’t get far enough to provide many lessons learned. If your startup never goes beyond your writing code in your basement with your buddies, all you’ve learned to do is write code in your basement.
  • You’ll gain confidence. Once you’ve been involved in a successful startup, you realize that, although it’s hard, it can be done, and you’ll have the confidence to do another one.
  • You’ll build your network, reputation, and credibility. It gets easier to hire, raise money, and to close deals with customers once you become knows as someone who knows how to do this successfully.

This should not be controversial: the best way to learn how to do a thing is to do that thing. Startup failure cuts that learning short.

But people keep asking about startup failure for a reason. What they are often asking is some version of, “if my startup fails, will I end up better off than if I didn’t start a company at all?”

The answer is that it depends on what your alternative to starting that company was.

If the alternative was to sit in a cubicle at a large company doing the same thing every day, then you will likely learn more from launching your own company. Even if it fails quickly, you’ll learn how to find co-founders, get a product out, interact with users, and maybe raise money and handle investors if you get that far. You’ll probably meet other founders and build a bit of a network that can help you with your next company. And most importantly, you’ll discover if you actually enjoy doing this or not.

But joining a large company and starting your own company are not your only two alternatives. There is a third: join a small but rapidly-growing startup as an early employee. This is a great option, especially if you aren’t quite ready to start your own but want to make progress towards that.

If you join a successful startup early then grow with the company, you may learn even more than starting your own company that fails quickly. You’ll get a firsthand view of what success looks like, you’ll build skills that are relevant at each stage of growth, and you’ll build your confidence and your personal network. If you go on to start your own company, you’ll have a blueprint for what success looks like and the skills and resources to help you succeed. Just make sure you are joining a company that empowers the team and shares information with them.

Regardless, you can never go too far wrong if you are in an environment where you’re rapidly learning, and you’ll almost certain have a more rewarding career if you spend your time thinking about how to succeed versus thinking about how to avoid failure.

This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:



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