Even celebrity faces don’t guarantee success – so why risk your money when 85% of all startups fail within three years?

Have you lost money through an investment in a startup? Don't feel too bad because you're in good company!

Kim Basinger, Nicolas Cage, Burt Reynolds, Hulk Hogan, Eva Longoria, Kiefer Sutherland, Selena Gomez, and Neil Young are just some of the stars that have invested anywhere from several hundred thousand to tens of millions of dollars into great ideas, supposedly great teams, or the next world-beating product, only to meet with failure. And yes, I know what you’re probably thinking. They could afford to make a bad investment, and be able to pick themselves up and keep moving forward. The average person not so much. And you’d be right.

Being rich was never a good indicator of one’s ability to pick a winner when it comes to investing into a person, company, idea or product.

So, what’s going on here? Why do startups fail? And more importantly, how many startups fail?

This is a question I hear a lot from Startups, corporations, investors, economic development folks,
academics, and journalists.

I’m from a Banking and Investments business background and have invested in and started up nine (9) companies in the past 26 years.  For the past 5 years, we’ve used a company called CB Insights to conduct market intelligence. It wasn’t always the case, sadly.

Their market intelligence enables us to see which companies and startups have the best innovations and smartest products by following investments made by the biggest corporations. Need to know which tech startup Alibaba has poured money into? Which IT service provider nabbed a fat contract from Amazon? CB Insights reveals all and more so you can also place your bets on future winners.

In their 2019 updated study of why startups failed, they analysed 101 failed companies and came up with their “Top 20” reasons why startups fail.  I’ve done my own post mortem of investments I’ve made that have not panned out.  So I thought I’d do a head-to-head comparison of my small universe of experience vs a data munching monolith like CB Insights!

Let’s first look at my Top 5 reasons vs CB Insights, and then I’ll take a closer look at the remaining reasons their research uncovered.

CB Insight’s Top 5 Reasons Why Startups Fail.

Pricing is a dark art when it comes to startup success and startup post-mortems highlight the difficulty in pricing a product high enough to eventually cover costs but low enough to bring in customers.

Delight IO saw this struggle in multiple ways, writing,

“Our most expensive monthly plan was US$300. Customers who churned never complained about the price. We just didn’t deliver up to their expectation. We originally priced by the number of recording credits. Since our customers had no control over the length of the recordings, most of them were very cautious about using up the credits. Plans based on the  accumulated duration of recordings make much more sense for us and the number of subscription showed.”

The 2019 shutdown of genetic testing and scientific wellness startup Arivale came as a surprise to many partners and customers, but the reason behind the company’s failure was as simple: the price of running the company was too high compared to the revenues it brought in:

“Our decision to terminate the program today comes despite the fact that customer engagement and satisfaction with the program is high and the clinical health markers of many customers have improved
significantly. Our decision to cease operations is attributable to the simple fact that the cost of providing the program exceeds what our customers can pay for it. We believe the costs of collecting the genetic, blood and microbiome assays that form the foundation of the program will eventually decline to a point where the program can be delivered to consumers cost-effectively. Regrettably, we are unable to continue to operate at a loss until that time arrives…”

Despite the platitudes that startups shouldn’t pay attention to the competition, the reality is that once an idea gets hot or gets market validation, there may be many entrants in a space. And while obsessing over the competition is not healthy, ignoring them was also a recipe for failure in 19% of the startup failures. Mark Hedland of Wesabe talked about this in his post-mortem stating:

“Between the worse data aggregation method and the much higher amount of work Wesabe made you do, it was far easier to have a good experience on Mint, and that good experience came far more quickly. Everything I’ve mentioned — not being dependent on a single-source provider, preserving users’ privacy, helping users actually make a positive change in their financial lives — all of those things are great, rational reasons to pursue what we pursued. But none of them matters if the product is harder to use.”

Children’s apparel delivery service Mac & Mia found itself in a tough spot competing with highly successful companies like Stitch Fix and shut down only a year after its 2018 launch:

“Mac & Mia faced a host of competitors in the children’s delivery box space, including the aforementioned Stitch Fix, which launched its kid’s clothing service in 2018. Stitch Fix went public in 2017 and has a market cap around $2.7 billion. At least 20 other upstarts have launched similar delivery services for children’s clothes.”

A diverse team with different skill sets was often cited as being critical to the success of a company. Failure post-mortems often lamented that “I wish we had a CTO from the start,” or wished that the startup had “a founder that loved the business aspect of things.”

The Standout Jobs team wrote in the company’s post-mortem,

“…The founding team couldn’t build an MVP on its own. That was a mistake. If the founding team can’t put out product on its own (or with a small amount of external help from freelancers) they shouldn’t be founding a startup. We could have brought on additional co-founders, who would have been compensated primarily with equity versus cash, but we didn’t.”

In some cases, the founding team wished they had more checks and balances. As Nouncer’s founder wrote, “This brings me back to the underlying problem I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.”

At Zirtual, which was forced to lay off 400 employees overnight after a series of financial mistakes and miscalculations, cofounder and CEO Maren Kate Donovan later admitted that one key
mistake was not bringing a CFO onto the board:

“If [a board] had actually been in tune, this would have been caught like six months ago… I blame myself on a lot of this, in not hiring more experienced people, but it wasn’t any maliciousness beyond just naivete…In retrospect, if we had a senior finance person and a senior ops person it would have been a completely different story.”

Money and time are finite and need to be allocated judiciously. The question of how should you spend your money was a frequent conundrum and reason for failure cited by startups (29%). As the team at Flud exemplified, running out of cash was often tied to other reasons for startup failure including failure to find product-market fit and failed pivots,

“In fact what eventually killed Flud was that the company wasn’t able to raise this additional funding. Despite multiple approaches and incarnations in the pursuit of the ever-elusive product-market fit (and monetization), Flud eventually ran out of money — and a runway.”

In September 2019, augmented reality startup Daqri shut down after burning through more than $250M in funding and failing to raise a new round from investors:

“Daqri faced substantial challenges from competing headset makers, including Magic Leap and Microsoft, which were backed by more expansive war chests and institutional partnerships. While the headset company struggled to compete for enterprise customers, Daqri benefited from investor excitement surrounding the broader space. That is until the investment climate for AR startups cooled.”

European budget airline Wow Air met a similar fate; Chairman Skuli Mogensen wrote to employees:

“We have run out of time and have unfortunately not been able to secure funding for the company…I will never be able to forgive myself for not taking action sooner.”

Tackling problems that are interesting to solve rather than those that serve a market need was cited as the No. 1 reason for failure, noted in 42% of cases.
As Patient Communicator wrote,

“I realized, essentially, that we had no customers because no one was really interested in the model we were pitching. Doctors want more patients, not an efficient office.”

Treehouse Logic applied the concept more broadly in their postmortem, writing,

“Startups fail when they are not solving a market problem. We were not solving a large enough problem that we could universally serve with a scalable solution. We had great technology, great data on shopping behaviour, great reputation as a thought leader, great expertise, great advisors, etc, but what we didn’t have was technology or business model that solved a pain point in a scalable way.”

Kolos was direct about its biggest mistake:

“With Kolos, we did a lot of  things right, but it was useless because we ignored the single most important aspect every startup should focus on first: the right product.”

So How Did My Own Experience Stack Up Against A More Comprehensive Study?

If you look at the side-by-side comparison, three of the five themes are similar.

Perhaps I was slightly luckier or more experienced than some of those startups that CB Insights investigated. However, in my experience as a Startup Mentor and Advisor, I agree with CB that for first-time Entrepreneurs who have never been responsible for running a business of any kind before, two very common mistakes are, taking your eye off the monthly budget vs actual and hence burn through your capital faster than you are raising it or making sales, and falling in love with your own invention or idea to the point where you are unable to see that consumers can make do with what they have, or that someone else can and will come up with a better, cheaper, faster, nicer etc. solution, rendering yours useless.

I’ll leave the final word on this topic to people who are legends in the world of startup investing.

A month after Paul Graham, Jessica Livingston, Trevor Blackwell, and Robert Morris started the Y Combinator seed accelerator in 2005, they picked “make something people want” as their motto.

 

This (admittedly) short and somewhat anecdotal study shows that failing to do this is one of the easiest ways to guarantee startup failure.

As a bonus for having read this blog to the very end, for the month of November I’m giving away a free E-Book on Email Marketing, which is one of the tools a good content marketing strategy should use.

Email Marketing E-Book

You’ll get this publication, valued at $97.99, absolutely gratis.

Just complete the form on the Free Resources page and you can download the free PDF file. 

If you want a second opinion about the business model or strategy you are about to start or have just started,  I’ll give you 15 minutes of my time for free to conduct a quick Q&A session.

Make a booking in my online calendar here.

If you’re looking to enhance your customer-centric capability, we have some exclusive offers for products that the likes of Amazon, and Zappos. I wrote a blog on this subject which you can read here.

You are going to need to create more and better content that your customers want. The more value you offer them, the more they’ll feel like they have found a home. On the content marketing side, I use and recommend Semrush.

Once you have created some content, the easiest way to use that content is to have an App that curates and posts that material at different times, i.e. set it up once then let it run. I use and recommend Missinglettr.

Email Marketing will grow your business faster than any other marketing medium!  I use and recommend GetResponse.

As always, I wish all of our readers an abundance of health, wealth and happiness.

Jim

Why Take A Risk – Learn The Secret Of Why HubSpot Is Such A Successful Content Marketer And Sleep Like A Baby…

Never heard of HubSpot? Who are they anyway and why are they important?

If you’ve ever downloaded a nice Marketing Infographic chances are that HubSpot was behind it. If you’ve ever searched for “who has the best (insert whatever software module a small business needs)…” then there’s a good chance that HubSpot’s name will be on that list. They are the quintessential Kings or Queens of content and branding and have perfected the freemium business model. Their free products, for example, their CRM (Customer Relationship Management) module are outstanding. DMO still uses the free version as we have not yet grown big enough to warrant the paid one.

Experts in Advertising

Every business, big or small, offline or online, if you want to attract attention generate leads, expand your customer base, generate or increase online sales, increase brand awareness or credibility or simply want to engage an online community of users, why take a risk, learn the secret of why HubSpot is such a successful content marketer, and sleep like a baby.

The world of content marketing changes constantly.

As we continue to be exposed to increasing amounts of promotions and advertisements, it’s up to marketers to break through the clutter.

What’s the best way to do this? Staying ahead of the curve by adapting effective content marketing strategies.

The 2018 Content Preferences Survey Report found that 71% of the users surveyed claimed that they consumed blog content during their purchase process. According to the same report, 40% of respondents shared that they went through 3-5 pieces of content before they engaged with a sales rep.

Attaining success in content marketing is a hard nut to crack. According to the CMI 2019 B2B Content Marketing study, 90% of the best content marketers claimed that they prioritize providing value to customers over brand promotion.

HubSpot states that “Content marketing is the process of planning, creating, distributing, sharing, and publishing content to reach your target audience. As a business, this tactic can help you improve brand awareness, boost sales, connect with your target audience members, and engage prospects and customers.”

By providing audience members with useful content to educate them on your products and services — and show them how those products and services effectively solve their pain points and challenges — you can increase conversions, improve brand awareness, boost revenue, and more.

Why is content marketing important?

Today, outbound marketing strategies (or anything that interrupts your audience members) aren’t as effective for reaching audience members and converting leads as they once were. Content marketing has become a popular way for businesses to combat this issue. In addition to expanding your reach, content marketing helps your business:

  • Educate your leads and prospects about the products and services you offer
  • Boost conversions
  • Build relationships between your customers and business
  • Connect with your audience to show them how your products and services solve their challenges
  • Create a sense of community around your brand

Now that you understand why your business should invest in content marketing, let’s review some examples so you can decide which types of content you want to create.

Content Marketing Examples

Although content marketing is an applicable and useful tactic for almost every company, brainstorming creative and persuasive ways to reach and convert your audience is no simple task. So, how can you succeed at content marketing?

To answer that question, let’s take a look at the various types of content marketing, plus some examples of each. This section will give you a better understanding of how you can incorporate content in your business’s marketing plans.

Types of Content Marketing

There are many types of content marketing your business may decide to leverage. Below are some of the most popular options.

  • Social Media Content Marketing
  • Infographic Content Marketing
  • Blog Content Marketing
  • Podcast Content Marketing
  • Video Content Marketing
  • Paid Ad Content Marketing

What HubSpot identified early is the need to have a Content Strategy.

Whether you’re just starting out with content marketing or you’ve been using the same approach for a while, it never hurts to revisit your content strategy plan — to make sure it’s up-to-date, innovative, and strong.

The first step to getting a leg up on the competition is to have a solid, smart content marketing plan in place.

What Is Content Strategy?

Content strategy refers to the management of pretty much any tangible media that you create and own: written, visual, downloadable … you name it. It is the piece of your marketing plan that continuously demonstrates who you are and the expertise you bring to your industry.

You might’ve heard how important content creation is to the growth of your business, but as you’ll see throughout this post, it needs to have a well-planned purpose. When you develop a content strategy, there are some key things to consider:

Whom You’re Creating Content For

Who’s the target audience for this content? For how many audiences are you creating content? Just as your business might have more than one type of customer, your content strategy can cater to more than one type of reader or viewer.

Using a variety of content types and channels will help you deliver different content to each type of audience you have in mind and engage everyone your company does business with.

The Problem it’s Going to Solve for that Audience

Ideally, your product or service solves a problem you know your audience has. By the same token, your content coaches and educates your audience through this problem as they begin to identify and address it.

A sound content strategy supports people on both sides of your product: those who are still figuring out what their main challenges are, and those who are already using your product to overcome these challenges. Your content reinforces the solution(s) you’re offering and makes your customers more qualified users of your product.

What Makes You Unique

Your competitors likely have a similar product as yours, which means your potential customers need to know what makes yours better — or, at least, different. This is where content comes in. In order to prove why you’re worth buying from, you need to prove why you’re worth listening to.

The Content Formats You’ll Focus On

What forms will your content take? Infographics? Videos? Blog posts? Having identified the topics you want to take a position on, you’ll need to determine which formats to budget for so you can best express that position.

The Channels Where It’ll Be Published

Just as you can create content in different formats, you’ll also have different channels you can publish to. Channels can include owned properties, such as your website and blog; and social media properties, such as Facebook and Twitter. We’ll talk more about social media content strategy in the step-by-step guide later in this article.

How You’ll Manage Creation and Publication

Figuring out how you’ll create and publish all your content can be a daunting task. It’s important for a content strategy to know who’s creating what, where it’s being published, and when it’s going live.

Today’s content strategies prevent clutter by managing content from a topic standpoint. When planning a content calendar around topics, you can easily visualize your company’s message and assert yourself as an authority in your market over time.

In my blog headline, I posed the question “Why take a risk – learn the secret of why HubSpot is such a successful content marketer and sleep like a baby.”?

Most readers are probably well down the road on their company’s content marketing journey. This blog was not meant as a free plug for HubSpot per se, although, having benefited from using their range of free tools, including free training, Learn What Content Marketing is and How to Do It [Course], I can say this – if you have to follow someone, then follow someone who has already found the right path and can lead you to success.

As a bonus for having read this blog to the very end, for the month of November I’m giving away a free E-Book on Email Marketing, which is one of the tools a good content marketing strategy should use.

Email Marketing E-Book

You’ll get this publication, valued at $97.99, absolutely gratis.

Just complete the form on the Free Resources page and you can download the free PDF file. 

If you want a second opinion about the business model or strategy you are about to start or have just started,  I’ll give you 15 minutes of my time for free to conduct a quick Q&A session.

Make a booking in my online calendar here.

If you’re looking to enhance your customer-centric capability, we have some exclusive offers for products that the likes of Amazon, and Zappos. I wrote a blog on this subject which you can read here.

You are going to need to create more and better content that your customers want. The more value you offer them, the more they’ll feel like they have found a home. On the content marketing side, I use and recommend Semrush.

Once you have created some content, the easiest way to use that content is to have an App that curates and posts that material at different times, i.e. set it up once then let it run. I use and recommend Missinglettr.

Email Marketing will grow your business faster than any other marketing medium!  I use and recommend GetResponse.

As always, I wish all of our readers an abundance of health, wealth and happiness.

Jim