Startups are hard. Really hard.

As a founder and investor in 20+ companies, I’ve seen my fair share of successes and failures. But here’s the thing—the reason startups fail is not what you think.

Sure, not finding product-market fit and running out of cash are often cited as the two major reasons for startup failure. But those reasons only account for 50% of failed startups.

What about the other 50%?

And, I’d argue, that product-market-fit and running out of cash are symptomatic of more insidious issues at play. They are downstream effects, not the root cause.

Where Startup Failure Really Come From

It’s not the product, market, or cash in the bank. 

Most startups fail because they can’t get things right with their team.

Don’t get me wrong, the trio above are important. But deeper issues with the team are usually the real problem. 

Consider this: 

• A great team will iterate the product until it fits the market. 
• A great team will jump markets until it finds a fit for its products. 
• A great team will always find money, no matter what the circumstances. 

But a weaker team is unlikely to survive these core challenges and so many more. 

And that’s where this article comes in! 

By understanding the root causes of startup failure, you’ll automatically be a few steps ahead. You can use this information to spot weaknesses in your team and make sure they get strengthened before it’s too late. 

Ready? Let’s get started… 

1. Lack of Focus

Startups are chaotic by nature. There are always a million things vying for your attention. Shiny new opportunities popping up left and right. It’s tempting to try to do it all. 

Most founders (even seasoned ones) put too much on their team’s plate. They assume more equals better, and that’s almost never the case. Your team ends up rowing in a million directions and nothing gets done (or done well). 

It’s extremely difficult to put out world-class quality when you’re balancing 100 things. Over time this type of company becomes known for mediocrity. Products suffer, customers suffer and growth suffers. Eventually, the company succumbs to competition and goes under. 

The fix? 

Identify 3 core team goals for the year and relentlessly focus on these three things. Get everyone aligned and laser-focused on these priorities. Weigh every new opportunity or idea against these three core goals. Does it help achieve them or not? If the answer is no, then it’s likely a distraction and you should put it on the back burner. 

Keep your eye on your North Star and don’t get sidetracked.

This is a great resource on this topic specifically

2. Going Too Fast

Another common trap is getting sucked into the hype of hypergrowth. Startups are expected to scale fast, and the pressure can be immense. ‘Move fast and break things’, as they say. But growing too quickly can actually kill you.

Burning out your team, over-hiring, and diluting your core mission in the name of rapid expansion has been the downfall of many startups. Just take a look at WeWork.

Instead of chasing vanity metrics and unsustainable growth, think about “balanced growth” across four dimensions:

1. Top line revenue
2. Bottom line profit
3. Customer satisfaction
4. Employee satisfaction 

Most startups focus entirely on the top line. But the best startup leaders understand that growth happens across all four of these vectors, and you must balance each for sustainable growth. 

Remember it’s a marathon, not a sprint.

3. Lack of Alignment 

It’s possible to have overarching company goals (as mentioned in #1) but still have misalignment throughout the company. 

Your sales team is doing one thing, your product team another, and so on. Everyone’s “working hard”, but they’re all pulling in different directions. And the outcome is similar to having no focused goals at all.

Little coordination across teams leads to massive internal inefficiencies, lower product quality, and sub-par distribution. 

So, how do you fix it?

A company-wide operating system which does two things. 

1. Provides operational clarity
2. Provides an operational rhythm

You create operational clarity by answering these three questions (I call them the PDP 3):

You create an operating rhythm for your company by establishing a routine of communications, meetings, and dashboards that the team can rely on. These keep everyone in lock-step and held accountable to their goals, and the broader company goals. 

We teach founders how to build an operating system for their own company in our scaleup accelerator. Check it out if you think it might help you. 

4. Team of Doers, Not Leaders

Many founders fall into the trap of building a team of executors rather than leaders.

They expect people to do their bidding but never empower them to make decisions for themselves.

Then later on, when they need their people to step up, they can’t. They’ve become too reliant on the founder to add any real leverage. So things continue to flow through the leader until they become a major bottleneck, the company stagnates and then eventually dies. 

Instead, focus on growing real leaders—not “yes-people”.

A team of leaders is a team that can scale. When you have people at every level who are empowered to make decisions, set goals, and seize opportunities, you remove yourself as a bottleneck. You create a culture of autonomy and ownership.

But this requires intentional effort and investment: 

• Encourage goal-setting. Have each team member set their own goals that align with the company’s overarching objectives. Hold them accountable, but give them the freedom to chart their own path.
• Delegate 80% of decision-making. With goals in place, you can let them make their own calls daily on HOW to achieve these goals. Reserve your decision-making for the larger stuff. 
• Foster a culture of initiative. Encourage your team to come to you not just with problems, but with proposed solutions. Reward proactivity.
• Invest in training and development. Leadership skills can be learned. Provide resources, mentorship, and opportunities for your team to grow.

5. Too Much Complexity

Complexity is the silent assassin of startups. It creeps in under the guise of “process” and “procedures” but quickly becomes a tangled web that strangles productivity.

More things to follow, more meetings to attend, more boxes to check —all working together to slow the company down. 

History is filled with startups that ground to a halt under the weight of too many approvals. Decisions that used to take hours (or minutes!) start to take weeks. Agility gets replaced by rigidity.

Fight this by keeping things simple and streamlined, even as you scale:

• Every meeting should have a clear purpose and agenda
• Every process should be regularly audited for necessity
• Every hire should be sorely needed, not “nice to have”

Keep your organization tight and tidy. I like to think of a Japanese garden in my head. Beauty through simplicity. 

Oh ya, and keep a watchful eye on the legal, financial and HR functions. As much as I love these folks, they tend to start the process and procedure death march. 

6. Not Embodying Values

Most companies have values. But I’ve noticed a stark difference between the mediocre startups and great ones: 

Great startups don’t just post their values on the wall, they actually live them.

Culture is what you do, not what you say. As a leader, you are the moral compass of the startup. If you don’t walk the walk, neither will your team.

When leaders act as hypocrites, preaching one thing but doing another, it spreads through the company like cancer. Morale deteriorates, and the foundation starts to split wide open. No one wants to follow a hypocritical leader. 

It’s on you to lead by example in every interaction, every day. Values should jump off the walls and into the halls.

You alone set the tone for your team through your actions. Be the change you want to see and others will follow.

7. Lack of Motivation

Building a startup is a long and winding journey. The initial excitement eventually fades, and the day-to-day grind sets in. If you’re not careful, motivation can wane and your team can start to wonder, “What’s the point?”

Motivation happens in three ways:

1. Personal – feeling a deep personal connection to the purpose (mission + values) 
2. Progression – accomplishing things you’re proud of and progressing in your career
3. Pay – getting paid well for the value you bring to the table 

Many founders underestimate the importance of #1, continually connecting the team back to the deeper mission. People need to understand how their work fits into the bigger picture. They want to feel part of something meaningful. It becomes part of their identity – a powerful thing! 

That’s why it’s vital to share customer stories, milestones, and learning moments. These elements add context and texture to your story. They make your team members feel like part of a compelling narrative, not just a cog in the machine.

Always link your team’s efforts back to the “why.” People give their blood, sweat, and tears when they know it means something. Give them something to believe in and they’ll walk through fire for it.

—

These 7 mistakes are fatal because they creep up on you slowly. They act more like slow-acting poison. You don’t see it coming until its too late. 

But once you have the awareness, you can proactively work to avoid these traps. 

So here’s the action plan: 

Take a hard look at your startup. Are any of these silent killers in play? If so, it’s time to get to work. Be transparent with your key people about what you’re seeing. Then work with them as partners to strengthen the weak spots. 

Do this over and over, and you’ll be on your way to building a company that not only survives, but thrives.

How I can help you… 

Are you a founder, executive, or manager? I’d love to support your professional growth. 

Here are three ways: 

1. Connect on LinkedIn and Instagram – where I post practical tips about leadership and startups every day.

2. Subscribe to my free newsletter – where I go deep on a variety of management and operations topics that will make you a better leader & operator. 
   
3. Join Highland – my executive coaching program for founders, where we help you become a top-tier CEO who can scale into the tens of millions & beyond.