Defy the startup odds
(This is a 3 minute read)
In this series of blogs I share some of the key insights from my research as part of my MA in digital experience design at Hyper Island. The research was both primary and secondary. Don’t worry, the blogs are not academic!
This blog outlines the numbers behind startups failure and reasons behind the failures. It then focuses on my research into the startup ecosystem. The second blog focuses on what I learnt by interviewing startups themselves. The final blog discusses the startup research sprint I designed and tested, to help startups make decisions based on user research. Which I believe will increase their chances of success.
If you're not familiar with design thinking, read these few shorts words first.
The staggering numbers behind startup failure?
Too many entrepreneurs embark on their startup journey oblivious to the fact that a staggering 90% of early stage startups fail! That’s 9 out of 10! Research shows that almost half of startups fail because there is no market need. Effectively too many startups launch products without ever validating their proposition with actual users.
When I started the research I wanted to understand a couple of things:
Why so many startups fail
How some entrepreneurs defy the odds
So I interviewed founders at varying stages of their journey as well as investors that fund and support startups.
Is the startup funding ecosystem set-up for success?
Not really!! When I say ecosystem I’m talking about the organisations who fund, guide and mentor startups. This includes academia, private investors and government.
Universities and MBA programmes continue to teach traditional business thinking which simply isn’t relevant for the post-internet era, where raised customer expectations & infinite choice are king. MBA’s wrongly treat startups as little versions of big companies, while universities are slow to adopt new approaches such as design thinking.
Government plays a bigger role than people might think in the growth of startups. Programmes providing early-stage startups with support and funding are usually done in conjunction with universities, the rationale being that universities are traditionally where R&D takes place.
But is this really the right place for innovation? A growing body of research suggests that there is a perceived failure by academia to turn scientific advances into marketable innovation. A recurring theme in my research is that too much focus is placed on shiny new technology at the expense of understanding user need and the problems your product will actually solve.
Government support for private investment is also questionable. Tax breaks are given to venture capitalists (VCs) encouraging them to invest but incentivising the wrong kind of behaviour. VC’s are searching for the ‘unicorn’ providing them with an exponential return. They know that around 70% of their investments will provide no return - a ‘zombie’. VC’s get a tax break of up 78% on these investments. The potential pot of gold the unicorn provides, coupled with the taxpayer taking the majority of the losses results in VC’s approaching startups investment as if they were spread betting. One investor even told me he spreads his bets so wide sometimes he even invests ‘blind.’
We need a system that encourages startup development, not one that encourages high stakes gambling.
More to follow shortly with my next blog (2 of 3) which focuses on my learnings from conducting primary research with startups.
I am keen to hear your feedback on this blog and any experiences of the help and support the startup ecosystem provided you.