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October 26, 2010

What is the #1 Reason Start-ups Fail?

THE WRONG PEOPLE, hands down. All other problems are a derivative.

Almost every successful business in which I’ve invested has involved a pivot, a re-positioning, a strategic jiggle of some sort. The world is full of unknowns, and the risks of these unknowns to a thinly-capitalized start-up are legion. The way these unknowns are navigated is a function of company vision and leadership. Even if the environment is poor, the rock-star entrepreneur can cut costs, run lean, tap into a market need and go for revenues. When things turn up, they can raise capital and go for it. But in the meantime they haven’t died. They can manage issues of weak capitalization, difficult environments and fierce competitors. So many companies I’ve seen with great technology and brilliant founders have failed because they lacked great leadership. I think it was John Doerr who said that he backs businesses and business models, not people. My thoughts are almost exactly the opposite. Great people with flexible minds, a customer-centric approach and nerves of steel win. Great people with high IQs and weak leadership skills need a perfect storm to win. Just my $.02.


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