Worth noting that the proximate cause of death is often times largely uninformative as to why the startup actually failed.
Most failed startups fit into the following timeline:
was burning more money than it was making =>
failed at raising more money =>
did a round of layoffs / cost cuts to get economics under control =>
couldn't right the ship and shut down / did a fire sale or acquihire
But, the above timeline doesn't teach you much about why the company really failed. The real answer almost always involves a multitude of contributing factors, and requires intimate knowledge of the startup's business.
For the most part, the only reliable source for this type of information is one of the founders, board members, or (sometimes but not always) c-level execs. And, even then, they have to be willing to be vulnerable (which is very rare).
If I could give some advice to Failory, it would be to think about how you can incentivize founders to share their stories. As it stands, they have little to gain and potentially a lot to lose (e.g. being labeled one of YC's "biggest failures")
One of the best talks I had was a two hour discussion of this very topic with John Walecka. John had invested in Freegate and we were discussing risks and why things failed.
He helped me understand both the concept of 'stacking risk' (where the startup is taking on more unknowns than it should) and 'over burning' where a startup attempts to hire itself into shortening its schedule which not only fails but exhausts needed capital.
To this day I never hire an engineer if I cannot write down EXACTLY what they will be working on and how it will help the schedule. Even if they are a "super star", if I don't have something for them to do that will check off things that are currently on the path to the next milestone, no offer.
Whenever I've watched over hiring from inside or outside it tends to end badly.
> Whenever I've watched over hiring from inside or outside it tends to end badly.
I can relate with this. I first saw this phenomenon play out twice within a large FAANG company where the leadership wanted to ship an immensely complex product fast by throwing people and so over hired. Both products failed miserably.
And the I saw a repeat of this at the entire company level. The extent of over hire was immense, fueled by cheap investor money and their push to grow-at-all-cost. The company is now just barely managing to survive, after a few rounds of layoffs and pivots.
Over hiring is a huge red flag from the long term success perspective. However, as an individual, if you get in early on in the cycle and play it well you will rise very fast in the org chart. I’ve seen a few do that consistently. Good for them I guess.
The two are connected. Over hiring is done on purpose to game promotions. In startups for funding. Depending on the timing and where you are in the hierarchy it can go either way. People switch every 2 years now so it’d doesn’t matter how the team does in the long term.
I'm sure the trend generalizes, but I'd be wary of cargo-culting it because a number of simple and plausible explanations put the causality arrow firmly in the other direction. Failure isn't fun to share, failure implies a need to re-think and strategize, failure means you can't delegate enough of your responsibilities to specialize in appearing quick and decisive to your investors, failure means you aren't in the startup circle anymore and aren't looking to cultivate your relationship with Sam Altman, and so on. Any one of those effects could singlehandedly create the observed trend without implying that quick response times lead to healthy businesses.
Of course, it's more of a symptom that is an emergent property than a root cause. Like saying every top tennis player uses $$$ rackets - so if I use $$$ rackets, I'll be a top tennis player.
If people knew Sam Altman judged companies more positively by their response times which resulted in more funding, that's a metric just begging to be gamed without actually making the business better.
As someone who is generally a "slow responder", I'll guess at the root cause. My guess is that being a slow email responder is correlated with (a) higher propensity to procrastinate, (b) general indecisiveness and (c) lower self-esteem, all of which are not hard to see why they would negatively impact business success. Of course, I could just be projecting, but when I am slow to respond to an email, it's usually because I want to overthink the response, or that something about writing the response is generally uncomfortable so I practice avoidant behavior (same thing feeds into procrastination). That root cause trait has proven very inhibitory for me achieving my goals.
Oh, that is 100% me. I have this anxiety related to external (non-co-workers) people. When I know it's a negative response email, it makes my heart and body tense up. I know it's purely an internal response, a personal perception/projection, giving imaginative power away, etc etc. I try to woo-sa (meditate) through it, but it's still very real for me.
Side note, for a throwaway account - you are impressively dedicated to it.
Sometimes jumping right into every single thing is not the best, ideal decisions do not all come the same way, and self-esteem has its ups and downs.
Independently, opportunity can be a real wild card.
Regardless, I think an investor can expect a prospect to be putting full time effort into building a relationship that can lead to a growth partnership, and not wanting to miss a day.
Once you get into ongoing communication you may not want to miss an hour.
If there is good allowance for urgency you're still going to need to go full professional and be able to pick up the phone.
Sometimes around-the-clock with backup.
When you can start out that way there's no need for email at all.
Might also be best at a high point of self-esteem, decisiveness, and undelayed action.
Other times when those are not all completely within reach, related actions should be in progress to more than compensate, in preparation for less inhibited times.
Well the answer is probably in 95% of the cases 'not enough sales', but it wont tell you anything. Also I believe even in hindsight you dont know what was really the problem (in the sense that you know what could have been done to make it succesful)
Not sure I agree with that. Most astute founders can tell you pretty accurately why they didn't achieve enough sales to offset costs, they're just unlikely to do so for strangers because it usually means admitting at least some amount of self-fault. I know I can give a shortlist for my own failed businesses that's a lot more detailed than "not enough sales".
Yes, but is the list really true (in an objective sense). I mean why didnt you act on it, or why was it only know afterwards. (Of course the list might contain a lot of unchangable items, but this would mean the startup was impossible)
Yes, I realized some answer might be: we were too slow another company took the cake. But it is difficult to say what other people can learn from it (be swift is probably what everybody knows)
no explanation is needed for joe founder failing to achieve a $1B outcome. Better to ask why the few succeed and the answer is usually one that could not have even been foreseen.
You might have some obvious situations that were big issues, but I'm not sure reason for a business failure (sometimes even success) is always obvious.
As a relative outsider, I would hope being labeled as one of the biggest failures would be a mark of experience among a set that claims or claimed to uphold the “fail fast” mentality and treats failure like the learning experience it is.
In Walk Street if you have a $50 million blow-up your career is shot. If you have a $500 million blowup you get a second shot because you must have been somebody to be trusted with that much money.
Looks like a universal pattern across different domains: an immediate cause of human death is usually different from the long-term cause of their health deterioration. Similarly, an immediate cause of crash is typically different from the root cause of the problem. But is there really such a thing as "a root cause"? I guess we can always look deeper.
Most failed startups fit into the following timeline: was burning more money than it was making => failed at raising more money => did a round of layoffs / cost cuts to get economics under control => couldn't right the ship and shut down / did a fire sale or acquihire
But, the above timeline doesn't teach you much about why the company really failed. The real answer almost always involves a multitude of contributing factors, and requires intimate knowledge of the startup's business.
For the most part, the only reliable source for this type of information is one of the founders, board members, or (sometimes but not always) c-level execs. And, even then, they have to be willing to be vulnerable (which is very rare).
If I could give some advice to Failory, it would be to think about how you can incentivize founders to share their stories. As it stands, they have little to gain and potentially a lot to lose (e.g. being labeled one of YC's "biggest failures")