According to the Eric Ries, an American entrepreneur and author of The Lean Startup there are two reasons why most startups fail.
Eric has over 20 years of experience in entrepreneurship. Today thousands of entrepreneurs are putting his principles to work in every conceivable industry.
Eric is the CEO of the Long-Term Stock Exchange, a company which was founded to be an attractive option for new companies to raise capital while keeping their focus on long-term instead of short-term results
So why are startups failing so badly everywhere we look?
The first problem is the allure of a good plan, a solid strategy, and thorough market research. In earlier eras, these things were indicators of likely success. The overwhelming temptation is to apply them to startups too, but this doesn’t work, because startups operate with too much uncertainty. Startups do not yet know who their customer is or what their product should be. As the world becomes more uncertain, it gets harder and harder to predict the future. The old management methods are not up to the task. Planning and forecasting are only accurate when based on a long, stable operating history and a relatively static environment. Startups have neither.
The second problem is that after seeing traditional management fail to solve this problem, some entrepreneurs and investors have thrown up their hands and adopted the “Just Do It” school of startups. This school believes that if management is the problem, chaos is the answer.
Unfortunately, as I can attest firsthand, this doesn’t work either. It may seem counterintuitive to think that something as disruptive, innovative, and chaotic as a startup can be managed or, to be accurate, must be managed. Most people think of process and management as boring and dull, whereas startups are dynamic and exciting. But what is actually exciting is to see startups succeed and change the world. The passion, energy, and vision that people bring to these new ventures are resources too precious to waste. We can— and must—do better.