Tech Startups Failures: Unraveling the Distorted and Outdated Business Model

Picture this: A bright-eyed startup founder walks into a bustling coffee shop in Silicon Valley. They are full of ambition and armed with what they believe is a brilliant business idea. Fast forward two years, and we see the same founder sitting in that same coffee shop. Their glow of excitement is gone, replaced with a burning disappointment. What went wrong? What was it that they did not see coming in their business model?

Startups: A Land of Dreams and Opportunities?

Many see the startup world as a land of dreams and opportunities, where founders will tell you that all you need to make it happen are tech skills, a brilliant business idea, and a sprinkle of seed money. However, the reality is far from their distorted idea of what a startup is and what it needs.?

If you can (it's a paywall), you might want to read How Stability AI's Founder Tanked His Billion Dollar Startup. ?

Here's the story:

Emad Mostaque founded Stability AI, which quickly became known for its image generation tool, Stable Diffusion.?

Stability AI received seed money from leading investors such as Lightspeed Venture Partners and Coatue Management.

If you don't know, many view Emad Mostaque as the man who started the AI gold rush.

Despite having the tech skills, a brilliant business idea, and plenty of seed money for a long time (the startup became a unicorn), Emad resigned from the board and as CEO. Many of his top people also quit. What went wrong??

Emad believes Stability AI can't compete with the startup structure of OpenAI and Anthropic. So, he threw the towel, leaving his successor to figure out what a startup business model truly needs to succeed.?

?? What type of business model do you believe a startup needs and why? Keep your answer in mind, and let's dive deeper.?

The Startup Fallacy: A Used Car Salesman Business Model

...is enough for them to make it.

That is why 99% of startups fail!?

By mirroring the tactics of a used car salesman, most startups fail to address the essential factor needed for resilience.?

?? What is the essential factor for growth? What makes us resilient in the face of adversity? What's your answer??

The Missing Piece: An Emotionally Intelligent (EI) Business Model

An EI business model is not just about having tech skills, a great idea or seed money. It addresses the impact of emotions on every decision we make, starting with our business value proposition.?

Take some time to answer this question:

?? What is the need your business serves??

If you answered that your company provides x, y, and z widgets, that's not a need. You are describing a product.?

A need is a feeling we want to experience for a long, long time.?

Look at your answer again. ?? How has it changed??

What made you change your answer (or not) is the Emotional Intelligence (EI) you applied to your business value proposition.?

If your business value proposition seeks to convince or coerce (creating a demand that wouldn't be there otherwise), it's not an EI value proposition.?

Emad Mostaque said he quit Stability AI because he can't compete with OpenAI and Anthropic, two tech giants. What do you believe was his EI business value proposition??

We can't fake EI. We have it, or we must develop it.??

Through the EI Lens

"I sell stuff."

People only pay for what they genuinely (feel) value. What we value is based on the feeling we want to experience for a long, long time —the need we want to fulfill.?

Tip: Stay away from trying to convince or coerce. Speak feelings. A fantastic business value proposition relates a satisfying feeling to a unique product. Sales are relationships (feeling ships.)

With that in mind,

?? What is the genuine (feeling/need) demand for your offering?

"People need cars."

People may need what you offer, but that doesn't mean they want to get it from your company. Building meaningful relationships with your team and customers is vital to driving sales, upping growth, and building trust.?

Tip: What's your company's employee turnover rate? Do people stay because they feel valued (feel), supported (a feeling), and appreciated (a feeling)? Or do they throw the towel and jump ship because they don't believe in your leadership skills—your ability to inspire resilience (guess what, a feeling!) in the face of adversity?

With that in mind,

?? What EI skills do you need to build meaningful relationships with your team, customers, key partners, etc? Be daring. Examine every facet of your business model through the EI lens.?

"I can borrow ten grand from my brother-in-law to get me started."?

While securing seed money is crucial, developing an EI business plan is also vital. An EI business plan upholds the financial aspects of the plan while also catering to the emotional side. It's a flow situation (a two-way street) instead of "People need cars, and I'm gonna sell those cars to them even if they don't like me, trust me, or vouch for my product in reviews."

Tip: Don't try to imitate Apple, Amazon, Google, or Meta. A startup throws $10 of spaghetti at the wall to see what sticks. Startups are very much about trial and error. The problem with that approach is that they forget they do not have the deep pockets of tech giants that throw $10 billion (or $100 billion) worth of spaghetti at the wall because they can.

With that in mind,

?? What must you do to prioritize the financial AND emotional sides of your business model??

If you still think feelings have no place in business, try selling your offer to someone who does not value relationships. How fast before they stab you in the back because they can???

Don't Be a Used Car Salesman!

Most startups (99%) fail because they use a distorted and outdated approach to business. By thinking feelings have no place in business and going for the kill—the "How much money can I make even if it hurts you?"—they neglect to nurture their relationships.?

Life is relationships.

Your business model reflects the emotional value you place on your relationship with yourself, your team, customers, suppliers, and more.?

Those who understand the vital role of Emotional Intelligence (EI) in all we do apply an EI business model. They develop their Emotional Tech?.

Our Emotional Tech? Solutions:

?? Emotional Intelligence (EI) Integration: We help you infuse EI into your company's model. By tapping into EI, you can create more meaningful relationships with your customers, your team, and more. It breeds loyalty. ?? What is the value you place on loyalty?

?? Strategic Planning: Success in the tech industry requires careful planning and execution. We help you set clear goals, seize hidden opportunities, and overcome the challenges you may face. We want you to turn a profit for as long as you want. ?? What is the value you place on profits?

?? AI Integration Strategies: Tech is moving fast. Staying ahead of the curve is crucial. We help you leverage the full potential of AI while ensuring that it aligns seamlessly with your goals. It keeps you efficient. ?? What value do you place on your free time?

?? We offer one-on-one EI coaching, Knowledge Base Building Services, and CRM clean-ups. These are also parts of a cohesive (EI) business model. ?? What is the value you place on congruity in alignment?

?As Richard Branson said, 'I think being emotionally intelligent is more important in every aspect of life -- and this includes business. Being a good listener, finding empathy, understanding emotions, communicating effectively, treating people well, and bringing out the best is critical to success. It will also help you build a business that really understands people and solves their problems. If I had let my IQ and my school grades determine my success, I certainly wouldn't be where I am today."

Open Loop

The journey of a startup is not just about tech skills or a brilliant idea. It includes Emotional Intelligence (EI) at every level.?

As Richard Branson said, success requires grasping emotions, building relationships, and solving real problems.?

By prioritizing EI and finances in your business model, you are making it more cohesive and human-centric, driving tangible business growth.

?? At the onset of this article, I asked, "What is the need your business serves?" I hope you now get that you serve the needs of every segment of your business model.?

?? I then asked, "What is the genuine (feeling/need) demand for your offering?" Remember. It takes a satisfying feeling to drive up the sales of widgets.?

?? Finally, I asked, "What must you do to prioritize the financial AND emotional sides of your business?" Let's hop on a 15-minute chat and find out.?

?? Bring in Anne Beaulieu today and transform the way your organization connects and communicates through AI!

Anne Beaulieu

Emotional Tech? Engineer

Human-Centric AI Advocacy | Generative AI | Responsible AI?

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