What should be the criteria for failure in a startup
In startup world there is a common wisdom that one should fail fast. My question is how do we determine when a startup has died and we need to move on. How do I know whether I should keep working on a startup and when to move on.
I don't believe there's a singular set of criteria for startup death that covers all indie and VC-backed businesses. Take a look at Failory. Learning from these stories will allow you to build intuition in this area!
Thanks for the mention @vbordo! I am Rich, the maker of Failory. I would say that there are an infinite amount of reasons for why startups can fail. No validation of the market and bankruptcy are two of the most common ;)
Of course! Failory is a fantastic resource and I've learned a lot from those stories. Keep up the good work. I'll be sure to reach out when I have a failed venture :)
Haha hope you never get featured in Failory!
This is one of the most large and significant practical questions most founders face, but I think it gets very little attention relative to other aspects of the process.
I frequently look back at projects I abandoned in the past and wonder what might've happened if I had stuck with them. I think there's really no way to know! I have stories about why I think they failed due to their underlying characteristics, but if the Airbnb guys had stopped after two years, there'd be completely compelling explanations for why the idea was unworkable.
There’s lots of reasons, but one really good one is if your unit economics aren’t working. This means, ok, you go out and get a sale and it costs more than it takes to get somebody to put their money down.
Don’t discount your time in this, and don’t discount profit. If you’re treading water, me, I say press on because you will almost certainly get better and more efficient as time passes. And non recurring engineering costs you could probably discount as barrier to entry, NOT a dealbreaker (unless you’re pre launch and there’s no way you’re going to get there with the resources you have).
But customer acquisition costs being out of whack are TOTALLY a reason to quit. A lot of indie folks heavily rely on b2b saas stuff because the per sale LTV is high enough that your unit economics work even if you’re kicking down doors personally.
It's a bit reductive but:
Can someone else do this better than you?
If yes, get that someone else, and leave.
Can you do something else that's better than this?
If yes, do that something else, and leave.
Note that this applies even to projects that look nominally successful.
I have a draft blog I plan to post on Friday that's related to your question. The short is that, depending on how long you've been trying to make your idea work, you may be quitting too soon and haven't focused on getting traction.
Here are symptoms I use to decide when to continue or discontinue:
1/ Did you get a spark of users when you launched? If so, it may be worth asking why they came and how you can reach people like those who signed up.
2/ Are users unsolicitedly providing feedback on what they want? If so, I'd say its worth continuing.
3/ Have people reached out to invest or maybe buy assets to what you built? If so, I think its worth going after it and focus on a traction goal.
If one or more of these have occurred, its worth giving it more time but make sure you set a growth goal and let that be your compass in how you spend your time and whether your startup has wings.
Best of luck!
When you have done all the MVPing, validation, and pivoting you possibly could do and still got nothing to show for?
Not being able to validate the idea and get sales. It also depends what failure means for you. Not generating enough revenue ( 1,2k per month ) or getting zero revenue.
Even if you're not able to validate the idea you can always pivot into something else.
So the main ideas are, not necessarily in the same order.
If all these 3 things match, then get feedback, build and scale.
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