Why Startups Die Slow Deaths

Raised on the bracing notion that iconic entrepreneurs defied the naysayers and the odds - and despite the populsr digital era advice about failing fast - many enterprises and their founders tend, instead, to display the very human inclination to hang on rather than give up. JL

Erin Griffith reports in Fortune:

Startup mythology states that founders must ignore those who say their idea won’t work. The reality is more complicated. Most startups didn’t publicly flame out or melt down. Rather, they’re living on in a state of limbo.The tech hero’s journey, typically recounted by successful entrepreneurs, conveniently skims over the real success factors: network, timing, and lots of luck. Tenacity is crucial. But so is knowing when to quit.

Life is a series of launch parties when you write about early-stage startups every day. Between 2012 and 2014, I profiled 488 different startups, from 10gen and 10sheet to Zynga and Zypsee. Conventional wisdom says 80% to 90% of them were doomed to fail. But when I recently tried to measure my hit rate, I found it wasn’t easy to determine which companies had actually succeeded or failed. No one throws a party to announce that a startup is slowly fizzling out.

The list’s spectacular successes were rare, as I expected. But so were the spectacular failures. Most startups I profiled didn’t publicly flame out or melt down. (A notable exception: Fab.com.) Rather, they’re living on in a state of limbo. Their websites are still accessible and their apps are still available, but they haven’t raised money in a long time. Often their Twitter accounts are dormant, their hiring pages are quiet, and their apps are buggy and in need of an update. Some have faced hurdles such as layoffs or a departed cofounder. Some have simply lost a sense of momentum—­practically a death sentence in the technology industry. Whatever the case, they’re stuck in startup purgatory with little hope of escape.

The situation is a real problem for an industry built on hypergrowth. Venture firms only need one blockbuster deal per fund to ensure a good return—which means that failure isn’t just expected, but built into the ecosystem. “Fail fast,” the Silicon Valley mantra, is another way of saying, “If it’s not working, stop wasting everyone’s time and money.”

So why are startups failing to fail fast? For starters, if we are in a tech bubble, it has yet to dramatically burst. Such an event would quickly scare off the new sources of capital keeping startups alive—crowdfunders, hedge funders, mutual funders, your rich uncle who loves Shark Tank, pro athletes, Shakira. (Even 7-Eleven and Sesame Street have launched venture funds.)

But it’s not just free-­flowing money keeping startups afloat. They endure because our entrepreneur-obsessed culture loves tales of Against-All-Odds Founders Who Never Gave Up. Startup mythology states that founders must ignore those who say their idea won’t work. The reality is more complicated. The tech hero’s journey, typically recounted by successful entrepreneurs, conveniently skims over the real success factors: network, timing, and lots of luck. Tenacity is crucial. But so is knowing when to quit.