Most research on why startups fail highlights a variety of reasons other than people ones.
CB insights did some research on start-up post mortems which was summarised in this Fortune article. It suggested that the 2 biggest issues were “insufficient market need” and “cash problems”. The team came 3rd.
A different study by Quartz media found that “people” was only just in the top 10 reasons why startups fail!! Here is their list:
- the business model wasn’t viable
- ran out of cash
- not enough traction
- lacked financing
- technical / product issues
- no market need
- customer development issues
- lack of focus
- disharmony on team / investors
I could share with you numerous other articles where the team / leadership and people issues were consistently not at the top of the list. And yet the No 1 determinant of success in start-ups is people. It’s what VC’s say and experienced entrepreneurs know, but it is consistently underestimated by everyone including VC’s. People and people problems kill more businesses than poor products or business models.
Here are 10 reasons why people matter more than anything else in a startup
- If the founding team don’t have a shared vision you won’t end up with a good product. You will have a lack of focus and that will slow down or break your business.
- If the founders and employees don’t share values, you won’t be fighting for the same things. If everyone is fighting for different things, you will be going too slowly to survive.
- If you don’t agree on who the boss is, then you won’t agree on what to do. Either someone has to leave or someone has to accept that they aren’t the leader.
- If you don’t ruthlessly get rid of mediocre people and people who don’t share the vision and values, your team will fall apart and your culture will wither and die.
- If you don’t deal with people issues, then they fester and cause conflict and that wastes time.
- If you don’t put much time into hiring and nurturing people, then they won’t nurture your company.
- If you don’t learn to delegate effectively then you won’t and can’t scale.
- If the founding team don’t prepare for conflict between each other, than they will run into a wall later, as it always happens.
- If the company doesn’t have clear and open communication channels, then it will struggle to scale.
- If the company can’t survive without a founder, then the people issues never got solved!
If you don’t care about the people, your startup won’t last