The two reasons startups fail

Startups fail for 1 of 2 reasons…

1. They scale before finding product-market fit.

2. They never find product-market fit.

The startup scales before finding product-market fit

A recent, highly visible example of this is Fast.

When the company shuttered, revenue per employee was $1,200. For comparison, revenue per employee at Twitter — an unfair comparison given that Twitter is a public company, but also one that has been poorly managed for years — was $700K in 2019.

Fast raised $100M+, hired hundreds at above-market rates, and you'd be hard-pressed to find more than a dozen people who had seen the product in action.

The startup never finds product-market fit

I’m going to pick on myself here.

At Fancred, we were a standout Techstars graduate, raised a few million from respected investors, had a wonderfully passionate user base, and were even one of Entrepreneur Magazine's 100 Brilliant Companies in 2015.

Growth was steady but never never never anywhere near escape velocity.

Why? We were too focused on our product and not focused enough on the problem. We confused stubbornness with conviction, so whenever pivoting was mentioned, it was shot down just as quickly.

Did sports fans need a way to showcase their fandom? Absolutely, but in hindsight, something like a face filter app that allows users to put team colors and logos on their faces may have cost less, and in 2013-15, it was quickly adopted and worth much more.