The Real Reason Behind A Failed Startup

Graphics: DALL·EE: DALL·E

According to CB Insights, 90% of startups fail within a decade, with nearly 71% shutting down within the first five years. The odds of survival vary by industry:

• Gaming & Retail: 50/50 survival odds.

• Blockchain & Cybersecurity: 90% failure rate due to oversaturation and unclear business models.

• Retail: 55% fail within three years.

• Web3 & Crypto: 88% failure rate due to declining investor trust.

• Fintech: 60% failure rate due to regulatory constraints.

• SaaS & AI Startups: higher survival rates (35-40%) due to VC funding. Still, in 2024, startup VC funding dropped 20%, and the downward trend is likely to continue in 2025. 

Many founders assume their startup will be different, of course. But in 2024 alone, 966 startups shut down, marking a 25.6% increase from the previous year. 2025 will unlikely be different; in fact, many expect it to get worse. 

Why Startups Fail, Statistically?

The top reasons for startup failure include:

• No Market Need (41%) 

• Poor Marketing Strategy (23%)

• Team Problems (18%)

• Cash Flow Problems (19%)

Graphics: Chat GPT

But if we were to look at the root of all evil? There is only one real reason that affects all the rest — unprofessionalism. Unprofessionalism is the hidden factor that worsens these common failures. Its admirable opposite, professionalism, goes beyond having a business plan or marketing strategy; it's about leadership, accountability, and decision-making. 

Below are some major red flags that scream AMATEUR to partners, investors, and employees. 

Blurred Lines Between Casual and Professional Communication

Source: https://colinjamesmethod.com/effective-communication-in-the-workplace/

• Maintaining a balance between friendliness and professionalism is hard.

• Oversharing personal information can undermine authority and respect.

How you treat employees, clients, and partners is the first building stone of your company. True, most professional ties seem very casual these days, but that doesn't mean your work-related connections are your buddies. There is a tangible, even if not always obvious, line between the two, and founders must walk this thin ice. 

Communication may seem like a minor issue, but founders who cannot set clear boundaries risk falling into the trap of mismanagement. This could severely affect the company culture and relations with investors. And those are the main building blocks for any company that stands a chance of surviving. 

• Solution: Build genuine relationships with your colleagues and partners, but make it about business, not pleasure.

Lack of Accountability: Not Making Your Words Count 

Source: https://www.paretolabs.com/lack-of-accountability/

• Failed commitments erode trust with clients and team members.

• Setting realistic goals is not always easy.

No matter your business, the founder's words should count for something. We've all been through projects when the initial estimate proved wrong, the budget was poorly calculated, or the timeframe appeared too short. It happens; everyone, including your clients and investors, knows that. 

But sometimes, enough is enough. Humane AI, a 2024-founded hardware startup, raised $230M but collapsed in February 2025 after poor product execution, lack of market demand, and sky-high return rates. Convoy, a​​ logistics startup, also collapsed after raising over $1 billion but failing to reach profitability.

A bit more responsibility, expertise, and timely response to challenges might have prevented that. Be careful not to slip; the first years are crucial, and few people (including clients and employees) will tolerate broken promises and failed expectations, no matter how justified your reasons for failing them may be.

• Solution: Set clear, measurable goals to track business progress.

Selling Products You Do Not Believe In 

Source: https://www.deloittedigital.com/

• Authenticity in product promotion fosters trust and credibility.

• Passion for the product often translates into better customer engagement.

You'd be surprised to know how many startups are selling products they do not believe in — not truly, at least. How do you plan to sell them if you do not see the value? But when you truly believe in your product, customers will, too. 

Of course, there is no warranty that the goods you believe in will be successful. This year, a hydrogen truck startup, Nikola Motors, filed for bankruptcy, failing due to financial mismanagement and a lack of a working product. Since 2015, Nikola has been raising funds, but a decade later, it still couldn't get people to buy their trucks.

Right now, it's hard to estimate the founders' belief in hydrogen-powered trucks. But one thing is certain: employees did not care enough to put in their best effort, and customers caught up on that. 

The real game-changer isn't the product — it's your belief in it. The days of aggressive marketing are long gone, and the only way to get money from clients is to offer them something of value. And that’s a matter of attitude towards your products and your work ethic.

So, the real question is: do you think your product or service has it? Can it help? Inspire? Make the world a better place? If yes — great! As Nikola’s example shows, you’re not even halfway there, but at least you are moving in the right direction. If not… well, it’s either changing your line of work or your attitude. 

• Solution: Conduct a customer validation phase before launching.

Prioritizing Sales Over Expertise

Graphics: DALL·E

• Early sales require a deep understanding of the product specifics.

• Cross-training teams can bridge the gap between technical knowledge and sales drive.

No matter which line of business you're in, selling is a crucial part of your operations. And it is usually the trickiest one. Finding an able sales manager (or pretty much any other salesperson) is not difficult, but the common challenge with these experts is that they are all SALES professionals. 

What is wrong with that, you ask? Nothing and everything. On the one hand, you get what you are looking for – selling. On the other one, sales managers often lack a thorough understanding of the products they are dealing with. 

In the initial startup stages, this can become a deal breaker. It does not matter if you promote refrigerators or iPhone apps — first, the leading salesperson should have deep knowledge of your products. So, if you're in IT, your sales manager should have an engineering background. 

As the sales team grows, you'll find more experts to assist your core salespeople. But there is a catch, as always. Hopin, a virtual events startup once valued at $7.75 billion, collapsed due to poor leadership and over-expansion after the pandemic boom faded.  WeWork faced a similar fate – poor leadership and overexpansion. 

That's why rushing sales expansion doesn't work. And that's why your top sales should basically have a dual degree. We don't live in the ideal world, you'd say, and such people are hard to come by. True. 

On the other hand, this is what distance training is for. Any professional, be it an engineer, an interior designer, or a fridge technician, can benefit from an online sales training course. Especially now, when upskilling is practically a must to stay competitive. Generally, it's easier to teach a pro to sell than to make a specialized expert out of a salesperson. There are exceptions, of course, which is why you need those rare gems who know what they sell and know how to sell it.

• Solution: Cross-train technical teams on sales knowledge.

Inadequate Leadership and Team Inspiration

Source: https://getbravo.io/exploring-incentives-in-the-workplace/

• Effective leaders inspire and motivate their teams beyond monetary incentives.

• Building a culture of belief in the company's mission is vital for long-term success.

Not everyone works for money. If you think of it, nobody does. Some people need cash to buy things money can get — there is no doubt about that. They can be useful cubicle drones, but they are not the people you need when starting a new business. Plus, how many drones do you really need at the beginning stages? Right, not so much. 

Ideally, your focus should be on the experts who can help build the company from scratch. They should believe in the products just like you do – possibly even more than you do. As an owner, you'll have your doubts (there is no escaping that), but people next to you should have none. The only way to achieve this is to lead and inspire. There is an enormous chasm between leading and managing, and if you want to build a successful company, you should learn to walk in the leader's shoes.  

• Solution: Hire people who believe in the mission and aim to inspire genuine loyalty. 

The takeaway? Unprofessionalism is about poor communication that erodes every area of a new business, from hiring people to raising funds. One can avoid the above problems, but in most cases, one will need an ultimate mindset change. A few other skills can be learned and mastered over time. The best news is that both are absolutely doable! Even more than that, once you change your mindset, the relevant skills will follow. It’s easier said than done, but it’s the only way that works in the long run.