The folks at CB Insights have done analysis on the main reasons why start ups fail, using data supplied by 100 different start ups. I was surprised by the top reason,
42% failed because there
was no market need
for their product or service
Whilst its been a few years since I plied my trade as a marketeer, I seem to recall a fundamental part of good marketing was something called market research. Its one of the fundamental cornerstones of marketing that any textbook on the topic in the 20th century covered in some detail. A lot of text book materials of my acquaintance have been woefully wide of the practical application mark, but market research is one of those that I think has withstood that old standard test, time. I would hope, too, that most investors would ask for some sort of evidence of an investigation into the size and addressability of a potential market. So I struggle to understand how nearly half of the survey could have gotten it this wrong. Is there that much money to be had that people asking for it don’t need to show why they should get it?
The other reasons were more typical for why new businesses fail such as cashflow and management issues.
Perhaps before start-ups start up, ensuring there’s a market is a thing to first check off the list! Minimum Viable Prudence?