The Real Reason Why Startups Fail (And it’s Not What You Think)
Why do startups fail? Here’s a look at the real reason why startups fail and it’s not what most founders think.
“Most businesses actually get zero distribution channels to work. Poor distribution—not product—is the number one cause of failure.” – Peter Thiel
Congrats! You launched a product.
You’re expecting a growth rate that mirrors Snapchat. Just publish to ProductHunt and watch the users roll in.
But, launch day comes and goes and your user numbers and you’re not seeing instant user growth. People aren’t falling in love with your product. The trough of sorrow has arrived.
Based on the CB insights study of the top 20 reasons startups fail, 42% of startups went belly up because there was no market need for their product or service.
Founders either created something people didn’t want or they were targeting the wrong people.
“So what,” you say, “if I build a great product, it will sell itself.”
The best product doesn’t always win. It’s the product that satisfies the right market. Are you putting the same amount of care and attention into your marketing strategy as you are into building your actual product?
Maybe your product is amazing. Maybe you did everything right and your product just needs to be discovered. Maybe your initial idea isn’t the right idea but it’s two iterations away from something great.
The problem could be that you’re not connecting your product to potential users the right way. Your distribution plan isn’t thought out and it’s taking you down the wrong path. The path that everyone else is trying because they read about it on TechCrunch. Maybe you’re not getting to the right users and getting the right feedback. Maybe there is too much friction between your product and your potential customers. Maybe you didn’t put enough thought into your user acquisition strategy.
WARNING: Over 60% of your growth experiments will fail.
Luckily, you only need one to work.
You could have a ground-breaking iPhone app but you aren’t optimized for the Apple app store. You haven’t connected with an App Sales rep and you have no idea how to do any paid marketing to get app downloads. Heck, maybe you don’t even know how to calculate your customer acquisition cost (CAC) against the lifetime value (LTV) of your customer.
Or, you could be a stunning clothing line for the plus-size category but you have no idea how to optimize your Shopify site for organic traffic. You could be ignoring some of the best Keywords like “plus-size dresses” that get a high volume of monthly traffic. (By the way, it’s 50,000 per month according to Google Keyword Planner.) Maybe you don’t understand the true power of affiliate marketing and influencer marketing in fashion.
What if you’re an incredible service for Ruby developers and you never even tried to connect with your potential customers through online forums or offline events via Meetup.com.
What does this mean? It means the doubters, the haters and the “I Told You So-ers” are feeling really good about your “great idea.” You’re losing hope in your product because you aren’t growing.
But the truth is it might not be the idea or the product. It could be that you aren’t using the right framework to uncover your opportunities for growth. The opportunities to put your product in front of the right people at the right time.
If you build it they will . . . not care
Unless you’ve invented free money. Users usually don’t just magically appear. You need to make sure you understand that. Know that you will launch a product and nothing will change. Yes, you’ll get some initial traffic from press but that new startup freshness goes away. This comes as a surprise to people. Why is this?
It’s because the overnight success of a startup has been romanticized to a point where it’s corrupted how people view growth. It’s influenced how people view marketing and it’s setting people up to fail. It’s part of why startups fail. If your leadership team is not seriously thinking about how you’re acquiring users then you’re going to have some tough days ahead. You need to understand your market and be relentless about connecting with them.
Imagine if Buzzfeed launched as a paid-only subscription website instead of a social-first online publication on Facebook. What if Groupon hadn’t worked so hard to craft an email strategy for their retention marketing plan? What if Mint hadn’t used content marketing to build trust for their personal finance app? What if Dropbox hadn’t used “free storage” as a referral marketing program and they kept trying to fine tune the paid advertisements? What if Paypal hadn’t stopped trying to do partnerships with banks to focus on a viral growth strategy to giveaway money to new users?
For every growth success story there are 10 more stories about the things that failed before they found their ideal distribution channel. So what does this mean? What is the silver bullet for growth marketing?
The silver bullet is that there is NO silver bullet.
It’s not about tactics and tricks. It’s about an approach and process that help you figure out the best way to align your product with the ideal users. It’s about how you can ensure success before you even launch a product. A growth marketing process that allows you to experiment, learn and iterate with lots of ideas until you find the one that’s scalable.
It’s about the strategy that gets sustainable growth. Are you putting the same amount of care and attention into your marketing as you are into building your product? Another way to say it . . .
“Make your marketing so useful people would pay you for it.” – Jay Baer
Relentless focus on execution is the x- factor in your growth plan to see results. Not just getting lucky, but consistently making your own luck, over and over again by testing and iterating. But it’s impossible to do this, if you don’t have a strategy for running growth marketing.
A set of rules for deciding how and when to make changes as you learn more about your business and the market within which it operates. A series of checks to make sure you’re on track to achieve your goals.
The right distribution strategy can save your startup.
The right distribution strategy connects your solution to the people that have the problem in a frictionless way. It forces you to connect the two by finding the right path or paths to uncover the people that will love your product. By focusing on distribution, you’re starting with the end in mind. You’re setting yourself up for success. Here is a look at the growth marketing strategy we use at Growthhit. Let us know what process you use.
This about why Startups Fail was originally posted on The Next Web by Jim Huffman.
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