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Why do startups fail? How new startups can learn from others’ mistakes

Expert.ai Team - 30 May 2017

When startups fail, how can ambitious entrepreneurs improve their chances of success? Autopsy.io is a website dedicated to failed startups and helping others learn from their mistakes. The site is a collection of links to articles where the entrepreneurs themselves attempt to explain what went wrong and why they failed.

So, what insight could be lurking in founders’ reflections of why their startup didn’t make it? To find out, we applied our cognitive technology, Cogito, to conduct a text analysis on the content on Autopsy.io.

What are the most common reasons that startups fail?

Using our semantic technology, Expert System identified the top 10 concepts cited when describing “failure”: Company, Product, Investor, Startup, Money, App, Team, Website, Market, and Client.

It’s interesting to note that common business factors such as marketing, revenue or employee issues were not among the top 10. By analyzing all of the words mentioned in the same sentence as “fail” or “failure, Expert System identified that “product” was mentioned 15 times in those sentences, compared to employee, marketing or revenue, which had only 2 mentions each. This could suggest that product was the main problem for many startup failures.

However, extending the text analysis to all words (not just those in sentences with “failure” or “fail”), the analysis showed that money is also a critical element. In fact, most startups were unable to raise the necessary funds to develop their ideas or projects.

Expert System’s text analysis also showed that words like “launch” or “sell” were mentioned much more frequently than “deliver” or “execute.” This indicates that, while the startups aspired to create something new, they couldn’t keep their promises. Moreover, the analysis showed that many startups may be too focused on product and not enough on the needs of end users or the market. In fact, while product was mentioned 454 times, customers and market were mentioned less frequently in the articles.

Not surprisingly, ourtext analysis on Autopsy.io identified the recurring use of terms like money, capital, fund, investor, product, team, and idea when the reasons for failure are mentioned.

To read the full analysis, click here.