(based on interviewing 101 startup founders and investors)

No market need 42%
Ran out of cash 29%
Not the right team 23%
Get outcompeted 19%
Pricing/cost issues 18%
Poor product 17%
Need/lack business model 17%
Poor marketing 14%
Ignore customers 14%
Bad timing 13%
Lose focus 13%
Disharmony on team/investors 13%
Pivot gone bad 10%
Lack passion 9%
Bad location 9%
No financing/investor interest 8%
Legal challenges 8%
Don’t use network/advisors 8%
Burn out 8%
Failure to pivot 7%


Source: CB Insights

No market need is by far the biggest reason why these and many other startups fail.

Software developers have embraced the practice of testing their code. I think the same concept should be applied to the business ideas. Do the homework and conduct market research.

How do you do it? Interview people, conduct surveys, questionnaires, use focus groups. Create a website with a “Coming soon” page and promote it as if the product or service already existed and see how many people would visit or sign up for updates.

I think part of the reason why so many startup founders skip this step is the dangerous, egotistical idea that they understand the market so well, that they can predict what’s going to be successful. A lot of startup founders idolize Steve Jobs who once said that customers don’t know what they want. While Jobs was successful, no doubt, there are many, many other people whose startups failed because they didn’t listen to the market.

It’s kind of like playing the lottery. It’s very tempting to focus on the winner and the money, but there are millions of other people who did the same thing as the winner (bought a ticket) and lost.