I know, you have seen a lot of these articles with beautiful (and not so much) infographics explaining that most startups fail because there is no market need or they just ran out of cash, or the team was not right, or the competition was fierce or any other twenty reasons.
These are very valid reasons, by the way, a whole lot of valid reasons... so then how come we make such a bold title?
Well, beyond the obvious (clickbait and big font-size), I strongly believe that many of those reasons are just symptoms of the very same root cause — the startup founders could not manage the complexity of their own endeavour.
Mass media loves to cover multi-billion IPOs and acquisitions or spectacular failures of well known companies. Somehow the process known as "muddling through" — the one happening in between the "I got an idea" moment and that magnificent climactic event of success or failure — is mostly left to academia, nerds and other niche audiences.
As a result, a stereotypical startup story sounds like this:
- I got an idea.
- Dropped out of college/quit my job to pursue my dream.
- Locked myself in a garage for forty days building that next-big-thing.
- .... muddling through (skipped over, it's boring, nobody ever gonna watch this)
- Woke up in the morning, so much traffic!! Need bigger EC2 instances! Scaling!! I don't know what to do with all this HUGE PROFIT!!!
When we get tired of the success rate of successful companies (it's 100%), we break out of this boredom by examining similarly spectacular failures, where the scenario is exactly the same, except the last step 5 where the company ran out of cash and CEO is in jail.
Notice, how our perception of startups is very similar to TV shows? There are "happy" TV shows were even the bad stuff is good ("How I met your mother", "The Big Bang Theory") and there are "dark" TV shows were the good stuff doesn't even exist ("House of Cards", "Black Mirror").
In reality, the step 4 — the muddling through — is the most interesting and rich on events and fateful decisions period and can last many years. It starts when a future startup founder gets an idea and decides to act on it, and ends when a startup becomes a business — when the founders figured out how to be profitable in a scalable and repeatable way by selling the service or product they originally came up with (or later pivoted to).
Muddling through is the essence of a startup and innovation and is the ultimate challenge where founders are surrounded by the unknown on a new territory trying to make it through all the obstacles with very limited resources. This is when most of fateful decisions are made and some of them can be fatal for a startup.
Making the right decisions (or, at least, non-fatal) is hard. There is almost never enough information and too many hypotheses, and too many things too consider, it becomes so easy to get overwhelmed and lose control over the situation. Again, Hollywood makes us imagine a scene when a Series B doesn't go very well and there is an ongoing litigation, and other fancy shit happens.
However, the majority don't even get a single VC round. They get too overwhelmed with just a necessity to register a business name, buy a domain name, find a corporate lawyer, understand the basic paperwork they need, do bookkeeping right, write a one-page business plan in a form of a Lean Canvas, find a co-founder (it's already getting too much work for one person), find a technical co-founder — and they haven't even started building the product!
Most ideas die already there as just ideas, never becoming a startup. We all have that friend telling how he or she had come up with the idea of Facebook or eBay, or Amazon long before Zuckerberg, Omidyar or Bezos, and only if he or she had acted on it but was too overwhelmed with number of things to work on, to learn and to sacrifice.