Here is a well-known fact — more than 90% of startups fail. And in my experience, all of them have the same unfortunate causes of failure.

Mistakes I see all the time:

1. A team does not have a required skill-set for the task. They just started a startup because “it’s cool to have one, right?”.

2. The startup idea turned out to be inoperative or unnecessary. Every brilliant idea has to appear at the right timing. To be more accurate it should be relevant right here and right now.

3. A very small and highly fragmented market. In this case, the marketing cost may outweigh the cost of the services or there could be a low demand among the target audience. In short — the potential profit just does not justify the means.

4. The project offers a rarely needed service. For example, we had a project in the mover market. But, how often does a person need a moving service? Usually, it happens every three or five years. Making a consumer application is useless in such a situation. That’s why this startup has failed.

5. Lack of funding. You can come up with an idea, build a strong team, start working on a project, and shut it down due to lack of money. However, it happens rarely. Usually, good projects with a timely idea and a potentially global market always find finance.

6. Bad financial planning. Burning a lot of money, while achieving small results always leads to deplorable consequences. This situation is called “Death Valley” — when a startup has not received income, the raised funds are not enough for the next round, and yet it cannot go back to the previous one. The project becomes unprofitable, but it is too late to abandon it since a lot of effort, time, and money has been invested.

7. Сompetitors can take the market over because your project developed too slowly. In the startup industry, 10–20 teams may work on one idea at the same time. And a two-week advantage can determine the fate of the entire market.

Also, I’d like to note some other common problems. So-called “pains of growth”:

1. Team conflicts. These may happen even if everything is fine. The founders may start arguing about who is in charge, who has the final say, and so on. Not to mention when difficulties arise and the founders begin to blame each other. These conflicts may be invisible to the investor and can initiate an explosion with devastating consequences

2. Unexpected changes in the market paradigm or entering the overcrowded market. This happens when the market changes too fast and the project is no longer needed by anyone, even if the startup has been growing well. The advertising industry is a good example. The market is highly monopolized and key players are rapidly changing the rules of the game. This can affect the startup and make its business model illiquid.

3. Constant losses and hopes for future profits. Remember that profit is an indicator of success. Usually, if the project constantly generates losses, more likely it will not succeed in the future.

I have listed the main mistakes startups make. Of course, there are still some special cases I haven’t enlisted.

What startup mistakes have you faced as an investor or as a founder?