why most B2B startups fail
It nearly always takes a few failed attempts before building a successful startup, and Baremetrics CEO Josh Pigford’s sheet of his 50+ projects prior to the business is a good reminder of that. Some of the best learnings in a founder’s career come from their previous misfires, which is why this week we’re sharing the top takeaways from founders’ failed projects. As they say, it’s better to learn from other’s mistakes than your own.
✈️ For a second, imagine your startup is a Boeing 737. You’re the pilot, and before you fire up the engines to take off, there is a checklist you run through to make sure you have a safe flight. 95% of airplane crashes are from human mistakes, so you’re going to make sure to read it twice. You see where we’re going with this—most founders don’t have a startup checklist before quitting the day job and going for it. This checklist highlights the common pitfalls most failed startups encounter, and how they can be avoided. The creators, Mitt Tarasowski and Anastacia Mudrove, spent over 300 hours researching the top reasons startups crash. Here are the highlights.
~50% of polled founders claimed the lack of a market need was the reason they failed, while 8% said it was because their product was poor. Better put, you can change your product or team members but you can’t change a market.
It took about 3 years for B2C startups to fail on average, while B2B startups took almost 4 years. More B2C companies (29%) felt weak marketing led to their demise than B2B (7%). CB Insights reported similar percentages (see below), but we think some B2B marketers are in denial here.
1% of B2C startups failed because issues with a third party solution they were built on, and 10% of B2B failed for that same reason. This just goes to show that if you’re B2B, a reliance on Instagram, Gmail, or any other tech giant is a risky play as you’re really at their mercy.
🎮 GawkBox was launched to enable viewers to tip video game streamers by downloading sponsored apps—basically donating without paying a dime. Their early uptake was promising. They made over 1m in the first 18 months, landed thousands of users, and ended up raising a total of 4.4m. But they were never able to find a business model which scaled, eventually calling it quits late this year. Here are some lessons their founder learned along the journey.
Get close to your customers: You’ve heard it before, but the fact remains, understanding your customers and their needs is everything. It’s unlikely you get the product right on the first go, so having them on your side to guide you is paramount. The more customer types you have the harder it is to really understand what they want, which is one of the many reasons it’s best to start ultra-focused on one target market.
Build a product they need: It sounds intuitive, but many founders build something they are passionate about without making sure there is a customer need. GawkBox’s goal was to provide streamers with more donations from typically non-tipping viewers through mobile app usage, but they were relying on those viewers’ altruism instead of a deeper need from that group.
Distribution is equal to product: Instead of thinking about what features you need to hit certain milestones, think about the number of users you need to hit them—they’re what’s paying the bills. This is easier said than done. GawkBox predicted how many customers they would need based on a limited sample size, which ended up having a higher LTV than their future customer base. This led them to underestimate the number of customers needed.