Startups can only die in two ways: the founder gives up or a court issues an order. In all other situations, they are alive. Since courts or legislation only shut down like 2% of startups, let's focus on why founders get disillusioned.
Why do founders give up?
You run out of money, personally
Startups "run out of money" many times before they actually die. There are almost always options for a company to continue (see section below), but when a founder runs out of money, and has no other way to extend their personal runway, that's when you kill it.
You are lonely for a long time
First, there's loneliness as a founder. It's a big risk for solo founders, but an even bigger risk following a cofounder breakup and a feeling of abandonment.
Then, there's loneliness in the responsibilities. It's can be a long time before you can hire a team, and even then there's usually a moat between founder/employee. Additionally, many founders experience being a sales person for the first time—it's unexpected and isolating when your genuine friendliness and eagerness makes buyers or investors standoffish.
And finally, there's loneliness at home.
Friends and family don't know how to talk to you about your work. Half of them think you are out of work. For those without a spouse or partner at home, dating can be hard when you are on a budget or your idea of a night out is bringing your date to a company dinner.
You lose your why
You can have a business without a "why," but a founder is much more likely to stay motivated if you understand yours. So the first risk is never getting to a clearly articulated vision.
Then, the why can get fuzzy because you iterate without filtering for bad inputs. Iterating on the product is good, iterating on the vision is bad. Founders start to iterate on their why in several ways:
- It took way longer to get validation from customers than expected
- A cofounder left
- The company hits a friction point when trying to scale revenue
- A competitor is doing better (for now)
- Investors or other authoritative advice-givers tell you it's not big enough (TAM chasing) or you're not the right ones to do it
The job becomes something you don't want
The founder job changes constantly. Your hat's change, the company changes, and the market changes.
Many pre-rev founders working in a product or industry you haven't worked in before might come to realize your vision requires a job you simply don't want to do. For example, you want to start a made-to-order suiting company for women, but there isn't a single manufacturer who supplies this. You thought you were starting a brand, but to succeed, you would have to start a manufacturing company.
Post-revenue founders might grow tired of a job you thought you would only have to do for a short time. Take a technical founder who constantly has to raise money and manage people. You'll do it, and you'll be good at it, but if it becomes all you are doing and you prefer to be coding, you might get exhausted and not fight as hard when fundraising gets tough.
Your investors aren't the right fit
If a startup makes it to series A or B and then dies, look here first.
Raising money, particularly post-seed, starts a clock. If you don't iterate, grow, and hit metrics according to the clock, you will not get more money. Which is kind of silly to think all businesses should have the same clock. If you don't hit the clock, you will have the choice of cutting to profitable, not raising, and growing slower, but then you'll be docked for that indefinitely. So this scenario only kills startups when it becomes a job founders don't want to do.
The real killer is investors who don't have the remaining funds, network, or conviction to get others to invest in you. Let's say your metrics look plenty good, but your lead investor can't participate in a next round because there's no room left in the fund (other port cos beat you to it). Now your metrics have to be top tier to overcome the stigma of your lead investor not participating in the next round. Your investor has to have the right network (stage, vertical, geography) and conviction (they have to understand the grand vision) to help you.
Founders, please always look up the track record of your series A lead. If they don't have a strong network of B- and C-round VC's or if they haven't had several investments in your space, don't work with them. It's better to take your time before starting the clock anyways. VCs can make your company die a slow miserable death (but you'll be the one to kill it).
What doesn't kill startups?
What do others say on the topic? Here's [YC](https://www.paulgraham.com/die.html) and [HBR](https://hbr.org/2021/05/why-start-ups-fail). There are other reasons commonly stated for startup failure. Exploring reasons that are often stated that are just covers for other reasons above:
The founders don't have the right knowledge/experience
Most people who actually forego an opportunity in order to found a business already have a healthy dose of confidence you can figure anything out or have an underdog mentality (just tell me I can't do it and see what happens). There's a reason you think you can do this.
Now founders might stumble upon something you don't want to do (item 4) or run out of money personally before you figure it all out (item 1) or have investors tell you you're not an investable team (item 3).
Experience certainly helps, but a lot of brilliant idiots successfully found companies. Having a growth mindset is actually a leg up.
The company runs out of money
Sure, this does happen and luckily most startups in the scenario aren't pushing the bankruptcy limits to qualify for that court order. But running out of money is often a decision point, not a death sentence itself.
If you are pre-revenue, it looks more like a founder running out of money personally. If you are post-revenue, it looks more like the job becoming something the founder doesn't want to do. Or investors who burden your investability.
Founders, if you design for enough time and really understand your why, you can't fail. Most of the time, you only fail when you quit.
