A VC’s View on Why Startups Fail

David Feinleib at Mohr Davidow Ventures has today’s great post up titled Why Startups FailGiven all the consumer web stuff that got funded between 2004 and 2006, we are heading for another wave of failure as companies run out of gas after their Series B / Series C rounds and their investors lose patience with them.  In addition, you’ve got the natural cycle of "well – it never really worked" – such as evidenced by the rumor from VentureBeat that Akimbo has thrown in the towel after raising $47m.

  • Mac

    $47mm down the toilet… painful to read about, when we're looking to raise $55mm for a real “bricks & mortar” operation with solid returns and a real plan — but not a shred of IntarWeb e-AnyDamnedThing. Sad. Just sad. Of course, it's probably more painful to read about for the guys trying to raise $10K or $100K…

  • I am not surprised at all. Having worked at a startup where 42M dollars were consumed in 1 year due to the management's decisions: all expense paid sales conference in Europe, rapid hiring, excessive use of high paying consultants, super high expectation of adoption rate.

    Someone should really publish adoption rate numbers to make sales projection more realistic. From my own painful startup experience, it is less than 1/1000.

  • Is it just Web2.0 companies ? I guess not. Look at Montalvo which took in more than 50 mn before sinking. I do not think it is fair to blame it entirely on naive planning. I feel it is more to do with timing, lack of strong differentiation, than planning.

    • Nope – it's not just web 2.0 companies, but I think they will be the highly visible ones in the blogosphere because of the self-referential nature of the beast (e.g. all the tech blogs writing about web 2.0 stuff).

  • Yasin Dewji

    I believe its the nature of this business….more ventures fail than succeed. But I think there are ways and means to stem this tide and allow for more success which in turn would benefit companies needing 10K or 100K but can't get it! Just as start up companies have to demonstrate a strong justification for funds, so should VC funders for all projects that went sour……accountability is very important for corporate Canada.