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Startup Failure

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Success and failure of startups in France and the USA.

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Startup Failure

  1. 1. WHY DO SOME STARTUPS FAIL WHILE OTHERS SUCCEED? #AUTOPSY
  2. 2. Agenda Introduction 1.Methodology 2.Autopsy: causes of startup failure 3.Success factors 4.Key takeaways
  3. 3. 525 000 companiesCreated in France 2015 1 80%Probability of failure within first 5 years 3 10 000 startupsGoing concerns in France 2015 2 Sources: (1) Insee (2) Estimate of Olivier Ezratty in “Guide des Startups” is between 10,000 and 15,000 (3) APCE
  4. 4. REASONS FOR FAILURE
  5. 5. 1. METHODOLOGY
  6. 6. 1. Analysis of 78 failures in USA (autopsy.io) 2. List of factors of failure 3. Survey of 108 entrepreneurs We analyzed 58 failures of French startups, enabling us to draw significant conclusions METHODOLOGY
  7. 7. 2. CAUSES OF STARTUP FAILURE
  8. 8. CAUSES OF FAILURE Analysis of 58 failures . Cause of failure Occurence* (%) Team not suited to project 39.7% Lack of time and involvement 37.9% Lack of cash/capital 31.0% Poor market analysis 29.3% Relationship problems within team/with investors 20.7% Apathy/burn out 19.0% Product/service not adapted to market 17.2% Premature scaling 17.2% Administrative/legislative problems 17.2% Poor business model 17.2% Inability to pivot/poor pivoting 13.8% Timing 13.8% Pricing/costing problem 10.3% Failure to use network/advisers 10.3% Management problem 8.6% Customer expectations ignored 6.9% Poor marketing strategy/positioning 6.9% Uncontrolled growth 5.2% Overtaken by competition 3.4% Wrong place 3.4% Communication/marketing expenditure not controlled 3.4% Business model not replicable/scalable 1.7% % occurrence means cause was responsible for x% of failures
  9. 9. CAUSES OF FAILURE Comparison USA - France . USA France Market 33.3% 39.7% Team Financing 21.8% 37.9% Time/involvement Team 16.7% 31.0% Financing Premature scaling 11.5% 29.3% Market Lack of scalability 7.7% 20.7% Relationships Competition 6.4% 19.0% Apathy/burnout Technical problems 3.8% 17.2% Product/service Pivot 3.8% 17.2% Premature scaling Macro environment 3.8% 17.2% Administration Timing 2.6% 13.8% Poor business model Wrong place 2.6% 13.8% Pivot Occurrence
  10. 10. CAUSES OF FAILURE Analysis of 58 French failures 40% Bad fit between team and project 38% Lack of time & involvement 31% Lack of capital 29% Poor market analysis % occurrence means the cause was responsible for x% of failures
  11. 11. CAUSES OF FAILURE Analysis of 58 French failures Competition was a cause of failure in 3.4% of cases In USA it was 6.4%
  12. 12. 3. SUCCESS FACTORS
  13. 13. SUCCESS FACTORS Rank Criterion Score 1 Company listens to its customers 9.09 2 Team members have a range of complementary skills 8.90 3 Company seeks to enhance customer satisfaction 8.77 4 Company adapts to market trends 8.61 5 Entrepreneur is a competent manager 7.97 6 Entrepreneur has a good professional network 7.76 7 Scaling must be controlled 7.64 8 Company must outperform competition 7.27 9 Company can create barriers to entry 6.35 10 Basic project concept is innovative 5.96 11 Company has first mover advantage 5.92 12 Little competition on the market 4.59 Average score of respondents
  14. 14. DIVERGENCE Sex Number of startups Age
  15. 15. AGE: youth favours creation, age favours growth Digital-savvy generation 18-25 and 26-35 have same TOP 4 and BOTTOM 4 ranking. They favour initial stages of startup. ➜ 36-50 group have a longer term vision with 7 major criteria including control of scaling and management. ➜ Over 50s have a legacy corporate vision. Demand adapts to supply and competition plays a key role. Successfactors 36-50 Team members have a range of complementary skills 9.60 Company seeks to enhance customer satisfaction 9.40 Control scaling 9.20 Company listens to its customers 9.20 Entrepreneur has a good professional network 9.00 Company adapts to market trends 8.80 Entrepreneur is a competent manager 8.60 TOP4 over50s Control scaling 9.25 Company must outperform competition 9.00 Team members have a range of complementary skills 8.50 Company has first mover advantage 8.33
  16. 16. SEX: Men are less risk-averse Global TOP 4 are major criteria for both sexes, but… ➜ Women emphasize human values and the long term - Managerial competence, control scaling, professional network - Innovative ideas ➜ Men take more risks - More male entrepreneurs - More clear-cut in their criteria for success - Disregard competition Risk Top 4 Long term
  17. 17. NUMBER OF STARTUPS CREATED: Experience favours emergence of precise criteria The number of startups created doesn’t change the success factor ranking except for founders of more than 2 startups. They attach more importance to: - Team - Control of scaling They attach less importance to: - Innovation - Competition
  18. 18. 4. KEY TAKEAWAYS
  19. 19. KEY LEARNING OUTCOMES Competition GenderCulture
  20. 20. COMPETITION NOT A KEY FACTOR Rank Criterion Score 1 Company listens to its customers 9.09 2 Team members have a range of complementary skills 8.90 3 Company seeks to enhance customer satisfaction 8.77 4 Company adapts to market trends 8.61 5 Entrepreneur is a competent manager 7.97 6 Entrepreneur has a good professional network 7.76 7 Scaling must be controlled 7.64 8 Company must outperform competition 7.27 9 Company can create barriers to entry 6.35 10 Basic project concept is innovative 5.96 11 Company has first mover advantage 5.92 12 Little competition on the market 4.59
  21. 21. COMPETITION NOT A KEY FACTOR Entrepreneurs are not afraid of competition → don’t believe in first mover advantage → not concerned by barriers to entry → not afraid to enter a competitive market
  22. 22. CULTURE PLAYS A ROLE Human factors played a greater role in France than in USA → time & involvement → relationships → apathy & burnout Administrative and legislative barriers in France, not in USA
  23. 23. FEMALE ENTREPRENEURS ARE MORE SCEPTICAL ABOUT THE ENVIRONMENT Is France a favourable environment for startups? WOMEN MEN 22% 44% 33% 10% FAVOURABLE UNFAVOURABLE
  24. 24. Are success factors universal or culture-specific?
  25. 25. Thanks! Ines de Beaucorps Jonas Bouaouli Leslie Shaw

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