Why do Startups fail? Analysis
It’s time to get serious. Let’s discuss the 3 keys to startup success bit more in detail.
The first key is your market selection. Last week I was watching “Becoming Warren Buffet” documentary, and I learned the secret of Buffet’s colossal success.
In that program, Warren shares the story that got him hooked in the early days from a rare book called “One Thousand Ways to Make $1,000.” It’s the story of “Penny-Weight” Scales Lure Pennies.
The idea is to buy a weighing scale, pick a good location, set it up, and it will lure pennies from all those curious to know how much they weigh.
It probably worked big time for him. He says, “I had everybody in the country weighing themselves ten times a day and me just sitting there like the John D. Rockefeller of weighing machines.”
It’s a perfect money-making option. All he needs to do was, invest money and put the machine in the right place [or right market] and it’ll mint money.
Isn’t it great?
This story and the experience has influenced and shaped Warren’s approach from then onwards.
If you look at the products and companies Buffett invests in, they all are used by almost everyone. They all are companies that cater to enormous markets like real estate, insurance, jewelry, news media, condiments, and more.
He sells what millions of people want. Because he understood early that the key to success and profits is choosing the right markets, with 80+ billion in net worth, it looks like he is right.
And that’s where many startups fail. 42% of the startups fail because of the lack of market need or chose the wrong market.
Because in a terrible market, even the best product in the world doesn’t matter — you will fail. You’ll spend years trying to find customers who don’t exist to buy your amazing product, get demoralized, and quit. And your startup will die.
On the other hand, a great market — a market with lots of real potential customers — the market will produce wonders for the startup.
You don’t need to produce an excellent product; you need one that works. And, the market will embrace it, help you build a great one, and make it a huge success.
Also, don’t worry if the current market size is small. It doesn’t matter. What really matters is the market size in 10 years. It is good to be in a small but rapidly growing market instead of a big but stagnated market.
Your first job is to identify a good market — a rapidly growing market full of potential customers. Spend as much as the time you need to get this correct and pick a great market.
