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Avoiding the top 3 reasons why startups fail

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By Scott Meacham
Copyright © 2018, The Tulsa World

My previous column I concluded by comparing starting a company to a long trip down a bumpy road. It’s true; there is nothing easy about building a business from scratch.

There are plenty of bright spots, moments of pure elation — succeeding with a prototype, signing a first customer and, of course, receiving that first check — but in between, entrepreneurship is full of opportunities to fail.

For even the most successful and experienced company founders, failure is part of the deal. However, failing doesn’t have to be deadly; many mistakes are avoidable.

CB Insights, a tech market intelligence platform that analyzes millions of data points on startups and venture capital, has produced compelling research and analysis around startup failures. They started by surveying the CEOs of 50 failed startups in 2014 and have continued to update the data since.

In 2018, based on the analysis of 101 startup postmortems, the top three reasons that startups reported failure haven’t changed. No market need (42 percent) tops the list. The next two causes are running out of cash (29 percent), and not having the right team (29 percent).

These results are consistent with our experience in Oklahoma; we prioritize our services to help coachable entrepreneurs de-risk by tackling these top three failure points.

It may sound obvious that if you are going to start a company, the first thing you do is validate a market need. But the same focus, creativity and passion that fuels an entrepreneur’s drive down that bumpy road also can create blinders.

The cornerstone of i2E support is venture advisory services that help entrepreneurs rigorously assess product/market fit. It’s a hard conversation sometime, but no matter how great a concept or technology are, if they don’t come together in a solution that solves a real problem for lots of paying customers, the entrepreneur’s dream will end up on the failure heap.

Some entrepreneurs are better equipped to manage the functions of the business than others. We identify where each portfolio company needs help and then supplement with practical guidance and expertise — especially when it comes to cash management. We work with entrepreneurs to develop business plans that match critical milestones to capital needs, from grant-capital assistance, to non-dilutive funding through federal and state sources, to equity investments.

When it comes to talent, the Love’s Cup competition gives hundreds of Oklahoma students a view of entrepreneurship as an exciting career path. We also educate and connect entrepreneurs through the annual Entrepreneurial Summit, the Who Wants to Be Workshop, and our Entrepreneur-in-Residence series, creating networking opportunities for entrepreneurs and their teams.

It’s not possible to entirely smooth the road for a startup, but it is possible to eliminate some of the bumps. That’s our whole reason for being — to help de-risk startups so more entrepreneurs can succeed and grow companies to help diversify and grow Oklahoma’s economy.

Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state support from the Oklahoma Center for the Advancement of Science and Technology and is an integral part of Oklahoma’s Innovation Model. Contact Meacham at [email protected]

Author

  • Sarah Graves Sarah Graves

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