We know it and you know it already: building a startup is not easy. Although we are tempted to be overwhelmed by “the overnight success” syndrome, plastered all over by media, forgetting that it’s easier to look at the success of others from the outside. And more importantly, forget about other’s failures, who paved the way for other’s success.
At Tapptitude, we work with startups, whether we help them define their product or develop it directly. In this article, we want to dive in 7 situations that come in handy when trying to understand what you need to take into account to make sure your startup has a real chance of success. Some of the failures might happen because the founder does not pay enough attention to the situation or they find them too obsolete to try to find solutions.
We don’t want to tell you to stop building your startup altogether if you realize you have left out any of the issues, but to take your time to ponder about them. We’re pretty sure that if you’ll pay close attention to any of these problems, you will make the right decision when deciding whether or not to continue building on the idea you have.
Let’s see the 10 causes that overlooked, can make or break a startup.
The primary cause of startup failure is building something that has no market – therefore, something that is not needed nor wanted. There are cases when products are built to solve a problem that was created during the creation, but it doesn’t always work like that.
Here’s the deal. If you, as an entrepreneur or as a founder, can’t express what the problem is, it certainly means you don’t understand the problem, if there really is one.
Another thing related to this is if the problem actually exists and you are not aware of it, you won’t be able to know who has the redacted problem, how people who have it deal with it and how to ease it for them.
Or in other words, it seems that you can’t find the right people. And by this we don’t talk about the team per se, but about the people who would use your product. You see, to build a great business that has the potential to change the world somehow, you need to have a great market.
A great market means:
- Clearly defined customer segments
- Customers who experience a strong problem, that makes them want to do something about it
- A considerable amount of people who can buy or use your solution
In the words of Marc Andreessen, “market always wins”, which can be explained in: the possible success of a product is at the intersection between a great market and a great team.
It is said that it takes 66 days to break or change a habit. And to make sure the change actually occurs, one needs to be motivated – and this is the most difficult part. Unfortunately, because of this, a surprising number of startups encounter this issue. Basically, they have to struggle to get traction and engagement until they either pivot or enter the dead zone.
As a startup founder, what you need to do before you’re building anything is to get a deeper understanding not only regarding the problem per se, but also about:
- How deep it affects the lives of those who have it
- How much it costs them
- The type of cost.
This is critical for products that are created for new markets and it needs strong behavior hypotheses that need to be tested and validated.
If you manage to solve the above-mentioned issues, you have reached a new challenge. The one where you have the solution, you have the buyer personas, and you are looking to find practical ways to reach out the defined target.
We’ve seen this before. A great team of smart startup founders who created what it seems to be a fabulous innovation, but who have no clue about how to get the product in the hands of those who would use or buy it.
When we say no clue, we mean this: they don’t know where those people are, therefore they have no idea what channels should they use to reach them, thus no information on how much it will cost to acquire and convert them.
Once you look at the CAC (cost of acquisition) and TOC (time of conversion) and compare them to your CLTV (customer lifetime value) and cash flow, you might draw an interesting conclusion regarding the financial viability of your startup offering. Since this case tends to be common, we wholeheartedly agree with what Peter Thiel says: “Poor distribution – not product – is the number one cause of failure.”
Whenever you are creating a new business, your purpose is to serve a market and capture as much value ass possible from it. When the market is great, it’s a well-known fact that you will always have competitors, whose purpose is to get as much from it for themselves, and implicitly away from you.
Therefore, when creating a startup you need to find new means and ways to defend your competitors, by creating advantages that are hard to overcome. Having the ability to create them, adds a strong layer of value – the “secret sauce” investors need and make your business stand out and to have better chances to become a strong player in the market.
The problem is that technical talent is scarce, and most of the time expensive. This is why many tech startups that only have non-technical founders, struggle to recruit tech talent. But, this is not the biggest issue – what is critical is when your non-tech team approaches a problem to which only a tech solution might be the answer.
In this situation, you have two options:
- To get a tech co-founder or a CTO early in the team, to make sure you can build something valuable fast enough, to make sure you can reach the market
- To find a tech company as your development partner – if you choose the latter, it’s highly recommended to build a startup where technology isn’t the core value of your business.
For the past 5 years, here at Tapptitude, we have been helping non-technical founders to build stunning products, in spite of them lacking tech knowledge. We do this by taking an active role partner and focus on defining, building and launching products that aim to solve significant issues and grow into sustainable businesses. Find out here how we do this.
This is a common situation that results in failure: founders who try to tackle problems for people they don’t know about and don’t really understand them.
If you want to solve a problem about which you know little to nothing, you have to go further than “getting out of your building” – you have to get among your core targeted customers, to understand:
- How a day in their life looks like
- What is important for them
- How do they take decision
- Who and what influences them
- What are their drives
- What are their hidden wishes.
We noticed this pattern in most early-stage startups. This is why, during our Product Discovery Workshops, together with the startup founders, we do a session of questions focused on customers. If we notice that there is a lack of direct knowledge regarding users, we step in and recommend methods to get it – they vary from your typical customer interviews, shadowing to the recreation of customer journey.
It’s pretty common for startup founders to forget what they try to build, by becoming way too enthusiastic about it and to imagine several other potential features. In this way, the risk of not creating something right for a specific audience, is high.
Our CEO, Gabriel Dombri, emphasised this in an interview for Techsylvania – “Startup founders tend to build too much of their product initially. This usually occurs in the moment they think that building a smaller product will not bring enough value for the user.” Thus, they start imagining new possible features that will make the product stand out. But, they forget one really tiny detail: the attention span of their potential customers is quite small.
Therefore, keeping that in mind, it’s necessary to create a first version of the product – a minimum viable product (MVP), then to target the right audience and plaster it all over the place.
An MVP, as the name implies, has to be the minimum product you put in front of your potential core users, to prove if it works for the specific audience. This way, you manage to spend fewer resources on something that might not even bring value and also to give your users the chance to understand and use the product.
The thing is that users don’t have enough time to process all the wow-super-cool features your product has – hence, why you should keep it short, simple, and crystal clear what value will the product bring to them.
When you already have a customer base, it’s the perfect moment to add features. It’s easier to market them since people already know about you and they will pay more attention.
Pivoting, in startup slang, means to change the strategy. Contrary to the popular belief, pivoting doesn’t always mean making a radical change that shifts the entire perception completely; but to make adjustments of a few aspects of the company. For instance, pivoting could mean:
- Platform change – from web app to mobile, or vice-versa
- Transforming a feature into the entire product
- Or the opposite – by including the product per se as a feature to another one
- Shifting your focus on a different target audience
- Adopting a new revenue model for monetization – for instance, ads or freemium products
- Swap to different technologies, to cut down costs and to create a more reliable product
But, then again, it is imperative to take into account if it’s time to pivot your startup. You should start thinking about it if:
- Your marketplace stop responding
- One thing gets more traction than the others
- A change in your perspective
- The competition is too fierce
They’re quite rare, but we have seen cases in Europe, where first-time founders tried to get investment, without launching the product. In this case, the mindset is like this: they hope to create a top-notch pitch deck, which will be presented in front of investors, and thus they receive money and the needed confirmation that the product is doable.
Unfortunately, this never happens. Investors want to see proof, not to hear stories – they are already surrounded everywhere with “the next Uber” or “next Airbnb” ideas, that have no real-life application.
What to do in this case? Launch the MVP, get provable traction, get a customer database, show the engagement and boil everything down into a great business opportunity. This way, we can guarantee you that any conversation with a serious investor will have a completely different tone and a higher potential to close a round.
This article was inspired by this piece of content written by our cool CEO, Gabriel Dombri. Since we enjoy working closely with startups, we thought an update was a must, in order to help out founders to make sure their business has a higher chance of surviving on the market and to flourish.