What defines a Fragile Startup?!
Startups in their early stages are fragile. That's why failure is dominant in the startup world. So before digging into how to build an antifragile startup, it is crucial to understand why startups fail. Of course, each startup is different. But there are common reasons for startups to fail. Below are the top five reasons.
Building something that no one wants
Many entrepreneurs get excited about the problem they solve. Once they are attached to their idea or product, they see it as the only way to solve all world problems. Such an attachment pushes entrepreneurs to build walks around them and gradually lose the connection with the reality that most of their target users don't care much about the problem they are trying to solve. The majority of startups start with an idea or a product that is focused on solving a small problem. That's not what makes a startup fragile. It is the tendency of founders to limit their horizons and stop experimenting.
Failure to diversify revenue streams
This seemed counterintuitive when I first discussed it with one of my mentors. Many VCs may oppose this idea, of course (well, it makes a startup more independent). But startups need to find ways to generate revenue until their product picks up, well, most of the time. Let me give you an example. A startup selling B2B software can offer professional services to its target customers. It is not scalable. But the founders and the team will learn a lot from such engagement. They will know actually to what extent their customers care about the problem. Also, it will help them prioritize the helpful product features.
Wrong Founders Mindset
A startup is a temporary organization trying to find a scalable and repeatable business. Therefore, it is all about experimenting and exploring until you reach the product-market fit (PMF). Unfortunately, many founders prematurely declare that they nailed it. They get too early into scaling the business mindset. They become more defensive and less receptive to feedback, and pivoting becomes unthinkable. I've seen many startups become sunk projects due to that mindset.
A startup's only advantage is its speed and ability to make decisions faster than the competition. Losing the ability to make decisions and move fast is like losing the whole game.
Lack of clear strategy
Yes, founders need to move fast. But if they don't have a sense of direction, they will fail; in the best cases, they depend on only getting lucky. That's not enough.
Lack of focus
Founders need to explore and experiment, but one experiment at a time to reduce variables and build up on the right learned lessons. As a founder, you are making your startup vulnerable to running out of resources before you make an impact or accumulate escape velocity.
Building the wrong culture
Culture eats strategy, and the rest of your business, for lunch. If you don't build the right culture from day one, even if you don't have enough runway, your company building will be 10x harder. The wrong culture will attract bad employees, will make everyone focused on the wrong priorities, and
Startups are fragile due to the market's overwhelming forces and innovation challenges. But ignoring the obvious to build a healthy business and a founders mindset makes the startup even more fragile.
In my next article, I will share the properties of robust startups. This is what most vital and successful entrepreneurs can build. But as I mentioned in part 1 article, this is not enough in today's turbulent world. That's why we will dig immediately into the properties of antifragile startups.