The Top 3 Reasons Startups Fail, According to a Man Paid to Save Them
Surprisingly, running out of money is not the No. 1 reason.
This story originally appeared on Business Insider
Steve Hogan has a special job in Silicon Valley. His firm, Tech-Rx, is hired to save startups that are circling the drain.
PandoDaily's Erin Griffith interviewed Hogan and asked him for the most common reasons startups fail.
Surprisingly, running out of money wasn't cited as reason number one. It's third.
Instead, only having one founder is the most common reason Hogan says startups die. Running a company alone is much harder and more stressful than it seems, and it's especially unusual for a startup to succeed with just one person behind it.
Reason number two: forgetting to ask, "Who's going to buy this?" before launching. Freemium models are often the fall-back business model, but if a founder doesn't have a truly amazing product, no one is going to buy an upgrade for it. "Unless you can get paying customers, you are probably going to die," Hogan tells Griffith.
Finally, running out of capital is a sure way to kick the bucket. Hogan says he sees a lot of startups get 90 percent of the way there then run out of cash, and it's often because they didn't raise enough during their last round and plan for enough runway.