7 Key Lessons to Learn From Failed Startups

Many new startups fail for various reasons. After all, starting a new business requires you to make a strong hypothesis about your target audience and about your products and services. More than that, you must typically adjust your approach over time to help your business succeed as you see first-hand what is working and what is not working well for your venture.

However, as an entrepreneur, you do not necessarily have to reinvent the wheel. Many other failed businesses can be studied, and you can use the lessons learned from these failed attempts to improve your own chances for success. 

Why Startups Fail: 7 Key Lessons to Learn From Failed Startups

7 Key Lessons to Learn From Failed Startups

You think that you know it all. After all, you’re already successful in your mind, so who cares what others have to say? Fight that urge every day… You know nothing.

– Jason Huertas, My Startup Failed

1. Validate your product with your customers

One reason why some startups fail relates to a lack of demand in the marketplace. You may think you know what your customers want and need, but you must validate your beliefs or assumptions directly. After all, the last thing you want is to make something that nobody wants to buy.

While focusing on a niche is a smart idea, confining your target audience to a very narrow segment can backfire. You need to understand your customers’ needs and wants, but you do not want to copy what another company has already attempted or is already offering.

The best entrepreneurs do not mimic successful efforts, and instead, they build a product or offer a service that is unique. Understand and embrace how you are different than the competition. Always test your products or services on a small scale before spending time and money expanding your reach.

2. Make sure the market for your product is big enough

Another common reason why small businesses fail is because the target audience is simply too small. The market should be drawn to the product or service that you offer, but it also should be large enough to support profitability and even growth from your efforts.

Remember that you can never do too much market research when launching a new business. Understand if your initial launch will be well-received by your target audience by studying the market. In addition, focus on the possibility for sustained growth and on the efforts of the competitors if you want to know as much as possible about your market.

3. Understand the importance of the right partners and team

You may be starting your business as a one-man operation, but this is not advisable in many situations. The most successful startups usually are a partnership or use a team approach.

Different people have unique strengths, and your ability to put together a great team and to harness combined strengths can pay off substantially. Technical skills, creativity, and other traits should be highly valued and sought after when you are putting together a team. Remember to allocate tasks and projects based on the strengths of the individuals.

Why startups fail: Building a solid partnership and team is essential to your business's success

4. Focus on your finances


Raising funds for your business can be stressful and time-consuming, but it is essential. You may have to pitch your project to hundreds of investors and venture capitalists before getting a commitment from someone, so be prepared to stare into the face of defeat numerous times.

Remember that you need money to get your business ready to sell to your first customer. You also need funds to keep your venture afloat until you become steadily profitably. Additional funds may be needed for emergency situations, growth, and more. All aspects of finances and expenses should be carefully researched so that they are as accurate as possible.

5. Find the right investors

The right investors can be a true benefit to a startup. These may be individuals with deep pockets as well as shared goals and beliefs. They may share your vision for the company, and they may even have exceptional insight or experiences that can be used beneficially to launch your startup more successfully.

On the other hand, when investors’ visions do not align with your own, you may deal with the stressful situation of butting heads frequently with investors when you should be focused on growing your business.

6. Stay focused

Many entrepreneurs are highly creative and adventurous. You may have dozens of money-making ideas and side ventures in mind, but you need to focus on the primary goal of launching your specific business in a targeted way.


Turn your attention to the essential elements associated with delivering your products or services to your target audience. Otherwise, you may lose focus, and your startup may flounder.

7. Don’t neglect marketing

Another common reason why some startups fail relates to ineffective marketing. Even if you have a great product or service that appeals to your target audience, they cannot make the decision to buy it if they do not know about it. Word-of-mouth advertising can be effective in rare cases for startups, but most entrepreneurs should plan to market heavily.

Determine an effective marketing campaign that will reach your target audience in a focused way. The internet is a great marketing resource for many startups, but you may need to hire a marketing professional with experience in online marketing in order to maximize the benefits it can provide to your startup in the most cost-effective way.

Failures are resources — use them

If you have every watched a startup fail, it may seem to do so almost overnight. However, most startups that fail begin to falter because of one or more of these issues. The problem may magnify over time and often without the founders’ knowledge or attention.

When the problem becomes glaringly noticeable, it is often too late for the founder(s) to address the situation. If you are preparing to launch a startup or if you have already taken the important first steps with your project, analyze the situation carefully to determine if any of these factors apply to your situation, and consider what you can do to maneuver around them.

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