Why Do 9 Out of 10 Startups Fail?

By: Jay Canning (CEO)
Category: Entrepreneurship
On: 9 May, 2022
Why do 9 out of 10 startups fail?

I was reading a very interesting article the other day about the failure rate of startups. The figures are quite shocking. Only 1 out of every 10 startup ventures succeeds in serving its market, and even with the help of venture backing, 75% of businesses still end up not making the cut.

For startup owners, this makes for sobering reading.

So what can you do for your startup to ensure that it doesn’t become just another statistic? 

First, we need to look at the specific characteristics of startups that make them prone to such a high failure rate, and then we will look at how you can use the power of Effective Intelligence to move the odds much further in your favour as a startup owner.

Startup Characteristics

The Failory article that I have linked to above mentions two key concepts that are very much central to startups as opposed to other types of businesses.

Startups must focus on growth and innovation. These are their lifeblood.

Of course, other businesses must do these things too, but startups are, in essence, built on risk taking. Starting your own neighbourhood coffee shop is a great business venture, but it can’t be classed as a startup for this reason. The innovation, risk and growth potential are not on the same level.

In a way, startups are the business version of a hypothesis test, or a laboratory experiment. They are so innovative, that it seems the only way to find out if they will be a hit or not is to put them out into the market and see what happens.

The problem with this experimental approach though, is that those with limited resources, be that time, money or both, can be wiped out of the game easily and have nothing left to be able to try again with another experiment.

Surely there must be a way to bring more balance to the risk as a startup owner, because a 90% chance of failure doesn’t sound too appetising!

How Thinking Influences Startup Success or Failure

Something that we don’t often hear about in the startup field is how thinking affects results - in other words, whether a startup succeeds or not is heavily dependent on the thinking that goes into it.

What do I mean by this? Let’s draw it out.

Profile - Thinking - Thoughts - Actions - Results

 

Whether you have a team or you are doing everything in your startup yourself as a solopreneur, the principles here are exactly the same.

Looking at the top of this diagram, the Results, this is where we see the conclusions of our startup experiment. In other words, whether it succeeds and becomes profitable, or joins most of the others in the dreaded 90% failure category.

Working backwards then, we see that the Results of our startup are determined by the Actions taken. These are the products you create, the marketing strategy you implement, the team members you hire, the investments you secure, etc. Nothing spectacular yet, you already knew that. Not a big deal, you might say!

Subconscious Processes - Metacognition

However, here is where it gets interesting, because we are now entering your subconscious. The Actions you take in your business are determined by your Thoughts - the conclusions you reach in order to make decisions.

In turn, you get your Thoughts and decisions from your Thinking. This is how you interpret data and draw conclusions from it. The vast majority of people are not aware of how they do this. It is entirely inbuilt, a subconscious reflex, something that you take completely for granted.

Because your Thinking occurs in your subconscious, you are probably entirely unaware of the innate biases and preferences you are applying when you do it. Depending on the task in hand, these biases and preferences can either be a good or a bad thing.

This brings us to the deepest level of the process. Your Thinking is itself determined by your Profile. This is who you are, at the most fundamental level of thinking. It reflects the entire set of preferences you have in terms of how you think and how you tackle difficult tasks like the one we are talking about - launching a successful startup.

Once again, your very own biases and preferences, or indeed those of your team members, are completely subconscious. They can very easily make or break your startup, and if you allow them to remain undiscovered, you are leaving your results entirely to chance.

The good news is that with Effective Intelligence, you can pull this entire process into the conscious level and use this new awareness to your advantage. This is a ‘meta’ activity - and no, we are not affiliated with Mark Zuckerberg! This is the discipline of Metacognition, and it is extremely effective.

Having this metacognitive edge will allow you to escape the odds of 90% against and give your startup a significantly better chance of success.

How can you gain this edge? Through conscious awareness of your Profile. We call it Rhodes’ Thinking-Intentions Profile, a proven tool developed by our founder J D Rhodes based on his action research in collaboration with Philips Electronics, Shell and other international companies. 

It has already been used with great success by well over 150,000 people all around the world, and has led to the publishing of 4 books to date.

You can find out all about your very own Thinking-Intentions Profile by getting your Key Strategic Insights here.