Startup Survival: The Jockey, The Horse, and The Race

Start up survival rates are thrown around like towels at a spa and are often used to measure and prove assumptions from all sides of the room. Whether it’s a support provider using them to baseline, an investor referencing them to negotiate, or a founder pouring over them to keep themselves awake at night. They are, however, the tip of the iceberg. Simply a broad picture view that fails to push hard into causality.

So why do startups fail? Well before we delve a little deeper, let’s start with some of those aforementioned stats. Not forgetting to get your pinch of salt ready…

• In the UK, 93% of startups last one year. However, within the first 3 years that figure reduces to approximately 40%2.
• The Southwest tops the UK success charts with a survival rate over 5 years of 45%3

So now for that salt. What is defined as failure? Some of these data sets use companies house data to track the dissolving of companies. Some financials. Those with more analysis prowess will report on commercial activity. In the case of Beauhurst, very much the latter. Which adds the definition of “Zombie” to the failure mix. Those that are suspected to be closed due to long periods of inactivity. If these are factored in to, then the figures take an even darker turn, with only 25% of startups “surviving” after 5 years.

With the numbers out of the way, we can move on to trying to answer the question at hand.

Why?

This is where everyone agrees. It’s complex! Whilst the potential reasons for failure are well known, documented, and taught. It can be one, or a combination of many reasons. This isn’t very helpful, but we can at least point to some of those that are within a reasonable amount of control.

1.????? The Jockey

There’s a reason why potential investors put such a high value on the qualifications of the founders and their team. People make ventures succeed.

A phrase we use a lot at an accelerator level is that “you don’t know what you don’t know”, and whilst a founder or founding team may have a lot of the prerequisites for building a successful startup, if they lack key skills, then then strategy and planning suffer. What is painfully obvious here, is that being a good founder has a catch 22 element to it. Like an elite sports person, they need to have the ego of a world beater in order to have the confidence to outperform the competition. However, they also need to counter this with humility, to know when they need to step out of the way and fill a skills or experience gap in their team. This is where outside influence is key. Finding someone, or a group of people, that can honestly appraise the quality of strategy, planning, and activity can help to build a map of what the venture needs before it’s too late. This comes in many forms, from accelerators, to advisory boards, to mentors, and so on.

2.????? The Horse

It is often noted that the biggest reason for failure is poor market validation.

I’ll caveat the next statement by saying that it’s my opinion. Founders are almost always domain experts or entrepreneurs. Neither is a bad starting point, but unfortunately this lack of balance leads to two common mistakes. The building of products that have no market need, or the building of poor solutions for the market’s problems.

The good news is that this is a matter of following process. Whilst the nuances of design thinking, lean startup, and other methodologies are lost in the simplicity of the following, the headlines remain the same.

• Problem Definition: Research and engage with users, competitors, and customers before you start thinking about the solution.
• Solution Development: Iteratively build solutions with continuous influence and input from the market and domain experts.
• Solution Validation: Deliver an MVP to real users, whilst maintaining the ability to monitor and evaluate the efficacy of the product.

3.????? The Race

No one can look into the future, and all the research in the world doesn’t prepare you for the myriads of obstacles and set backs that you are likely to come across as an entrepreneurial founder. Market shift, emergence of new technology, cultural change, finance availability, personal conflict, commercial quality failure, and so many more challenges will rear their ugly head at some point, and to varying different levels.

So how do we prepare? My new favourite phrase for 2024…. Enduring human capabilities.

Build and foster a team that have the qualities needed to push through. Find action takers, risk embracers, team players, communicators, growth orientated, diverse people that add resilience, drive, purpose, capacity, and capability to your entrepreneurial vehicle!

The bigger picture.

Failure is often seen as a badge of honour in the startup world. A rite of passage if you will. Whilst this can be debated till the VCs come home, one fact is inexcusable. Experience is everything. You might be a jockey on a horse, in a race, but if you don’t win, there’ll be other races and other horses. There are also other jockeys in other races, on other horses that we can help to win, or learn from for next time. So with that, I’ll finish with a quote from a Becky Chambers novella that embodies how we can all benefit and contribute to the success of the entrepreneurial community.

“We step out of our solar system into the universe seeking only peace and friendship – to teach, if we are called upon; to be taught, if we are fortunate.”