5 Signs Your Startup is Failing
Ninety percent of startups fail in US, let alone the rest of the world, every year. While “failure” is a relative term, I recently had the opportunity hear the thoughts of a few people on signs that indicate imminent failure of a venture. These are folks that have been involved with startups and have either watched their businesses crash and burn, or felt their venture fail for themselves on a personal level.
1: Your Passion is Not Shared
Money alone can keep an idea afloat, but it can never help it thrive. Startups are built on passion (that and a few solid rounds of funding). A seasoned entrepreneur told me (and I loosely quote):
“My partner would come in late and leave early. They wouldn’t communicate well with the team and they were not as skilled as I initially had thought. They simply were not as committed to the success of the company.”
Yet, they were never fired – they went down with the ship. People who are not passionate, especially those with high equity stakes, will bring the company down by lowering productivity, weakening moral and draining the budget.
2: You Have Zero Doubts
One of the entrepreneurs to share their thoughts, Michael Lopiansky, wants startups to remember that they need continuous growth to survive. Feeding on doubt is a good thing for early-stage businesses. Hiring people you look up to creates an environment of constant growth where employees learn from one another and together learn from the industry.
If your company reaches a point of total confidence and clarity, you’re probably missing out on noticing the silent killer that will bring you down.
In the words of Steve Jobs, “Stay foolish”, because if you think you’ve hit the top, there is nowhere to go but down.
3: The Water cooler is Buzzing
In a corporate environment it is very common to have hierarchies that clearly define the levels upon which employees stand. This creates social barriers and often times an “Us” vs “Them” mentality between lower-level employees and upper management. In this scenario, office environments have their fair share of gossip buzzing around, often time with a direct impact on employee moral.
In a startup, especially within a small team, this should not happen. Everyone should have a passionate stake in the project and communication should be open and honest. If a small startup (which I would define as a team of 20 or less) is loud in whispers and disunity, it might be a sign that the crew is breaking apart.
4: You Have No Revenue
An argument can be made that companies like Tumblr, Instagram and Waze had zero revenue but ultimately amazing returns. It’s important to keep in mind that these companies had financial backing. When bootstrapping your own startup without some fat VC cash, Margelit Hoffman points out that a lack of revenue is a sure sign that your business model needs to change. Startups are built on passion, as mentioned above, but if that doesn’t translate into a currency accepted by your landlord/mortgage bank, you’re probably doomed to fail.
5: You Lose Track
If you can’t answer the simple question of “Who is your target demographic?” or “What does your product do?” you’re probably in bad shape. Startups are known to pivot – it’s often times part of the game. Not every product launched on the web is the same as the concept from which it was born. But know what you’re building and why you’re building it.
These are not sure signs of failure. Anyone with proper foresight, instinct and passion can pull out of these situations. But they are important things to look out for.