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5 signs your startup is screwed

JR Raphael | Jan. 5, 2016
The founders of failed startups share lessons learned along the way -- and signs of impending doom they wish they'd spotted sooner.

5-signs-your-startup-is-screwed
Credit: joeannenah via Flickr

Building a startup is risky business. For every Facebook, Google, or Uber, there are hundreds of once-brilliant-seeming companies that entered the tech landscape with great fanfare -- only to fizzle out and fade away a matter of months later.

We tend to hear about these failures far less frequently than the successes -- that's a shame, because there are important lessons to be learned from those who tried and fell flat on their faces. Lucky for us, a venture capital database company called CB Insights took it upon itself to track and compile the many postmortem emails, blog posts, and interviews startup founders have shared over the past couple of years. Boy, do those missives contain fascinating insights.

I sifted through all the tear-shedding, blame-shifting, and self-flogging to find some of the more telling themes from these sorrowful tales (setting aside the obvious stuff like running out of money or building a product that people flat-out rejected). You might recognize one of these signs from a startup you know today. Or, given that IT projects are often like microstartups within an organization, you might learn a lesson or two about how not to steer your project straight into the ground.

Failure sign No. 1: You don't have a strong and consistent focus

Knowing what a business is all about means everything -- especially in the critical early months when a startup is working to find its footing. If you see a startup without a strong focus -- or with a focus that keeps changing or expanding -- it might be time to start worrying. It's a lesson numerous founders have learned the hard way.

"We were trying to do everything for everybody," writes Yash Kotak, founder of the failed startup Lumos. "We were making switches that could automate your lights, fans, ACs, and water heaters. We would have tried to automate your TV, fridge, oven, and car as well, had it been feasible to do so."

The issue, Kotak says, isn't that it's inherently bad to pursue multiple angles; it's that you can spread your resources only so thin before they get tight -- and that's when something is bound to snap. Sound familiar?

"As a startup, you are constrained in resources," he reflects. "So it is always better to identify and solve one problem very well instead of solving n problems in a so-so way."

Thor Fridriksson had similar struggles at his now-defunct startup, Pumodo. As he recalls it, he and his cohorts got "tangled in the hype machine" and made the same mistake of being mediocre at a bunch of things instead of being exceptionally great at one.

 

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