Why Do Companies Fail?

Every week I read about another company that has closed its doors. Many news outlets are quick to report on the closures but rarely there is an analysis on why they failed.It's so easy to write a post that a company has failed and note simple items including number of employees and amount of venture capital raised. The more important education for all of us comes from why the company failed.

I speak with a number of startups each week and review many concepts and ideas and typically see issues in a number of areas. Some concepts just won't work outside of a small niche group of users. Other concepts are versions of services that are already popular. Rarely do I think the products failed because of a lack of investment capital.

A startup pitched me last week and while I thought I understood the concept before we spoke, after the call ended I was very confused about what the service actually does and how it could benefit my startup. I could have been a customer of the service but now I will pass. If they can't explain it to me, how can they expect to close sales?

I often wonder if the marketing or PR strategy was what failed. So many of the startups I speak with have great ideas but have no idea how to get the concept out to the masses. Most of the emails I receive from PR firms are so over-the-top that they make me pass on covering the service. I've spoken with other tech bloggers who say the same thing. How many other news outlets pass on coverage for the same reason? If the contact was handled better, would the startup have a better chance for success? Do the entrepreneurs know that this type of contact might be hurting their chance for coverage? The lack of coverage could lead to lower exposure which ultimately could mean failure.

It's hard to dig deep enough to actually figure out what elements failed. It takes a good deal of investigation to look below the source of "there wasn't a market" or "they didn't raise enough money".

Path 101 founder Charlie O'Donnell announced earlier this month that the Path 101 career service would continue as a "nights and weekend" startup. While the service hasn't closed, Charlie has shared his thoughts on why the service didn't hit the traction he expected. He's written articles on product roadmaps and industry momentum.

It's hard to admit that we have failed. But the key to failure is in the learning and sharing the lessons will help others to not make the same mistakes. I hope we see more entrepreneurs sharing their stories and perhaps a blog dedicated to lessons learned would be a great resource for the community.