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Most startups fail.
More than two thirds never generate a positive return;
their investors come away empty-handed.
But why?
This question hit me with full force a few years ago because I suddenly realized: I don't know.
I was stunned.
After all, I've been teaching as a professor at Harvard Business School for 24 years.
I lead the team of lecturers there who teach the course "The Entrepreneurial Manager", which is a compulsory program for all MBA students.
In addition, based on my research, my experience as a business angel and my work on the management boards of several start-ups, I have designed 14 elective modules that deal with all the questions that arise when founding a company.
Just - was I actually able to teach students how to build successful startups when I didn't know why so many fail?
Tom Eisenmann
is Professor of Business Administration at Harvard Business School and holds a chair at Harvard Innovation Labs, an institution for students and alumni interested in innovation and start-ups. This text is a slightly edited excerpt from Eisenmann's book "Why Startups Fail: A New Roadmap for Entrepreneurial Success", published by Currency in 2021.
I decided to get to the bottom of the question: I interviewed hundreds of founders and investors through discussions and surveys. I've read tons of publications by and about entrepreneurs who have suffered setbacks, and I've authored over 20 case studies of failed startups. The results of this work have been incorporated into my book "Why Startups Fail" (Currency 2021), in which I identify recurring patterns that explain why so many startups fail.
What I've found contradicts the common assumptions made by many venture capitalists.
When asked why young companies fail, they often speak of "horses" (the business opportunities that start-ups rely on) and "jockeys" (the founders).
Both are important, no question about it.
Given a choice, however, most venture capitalists would prefer a talented founder to an attractive opportunity.
So it is only logical that when asked why a promising start-up had to give up in the end, most of them cite the deficits of the founding personalities - preferably their lack of bite, a lack of business acumen or inadequate leadership skills.
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