This executive summary examines reasons for failure of new e-commerce ventures. Through interviews with venture capital firms, the study identified internal and external causes of failure. Key internal causes included inappropriate business models, unexperienced management, poor product-market fit, and insufficient funding. Potential measures to reduce failure discussed better understanding markets and financial needs, validating product-market fit, and raising substantial funding. Venture capital firms described implementing measures like regular meetings and evaluations to monitor portfolio companies and reduce failure rates of new e-commerce ventures.

1. Master Thesis – Executive Summary
Why do new ventures in e-commerce fail?
Sebastian Merkhoffer
Prof. Dr. Roland Gleich
Dr. Georgi

2. Master Thesis - Executive Summary
The global e-commerce market is gaining traction
2
Introduction
Trillion USD
“The process of trading goods, information, or
services via computer networks including the
Internet”
(Turban, Lee, King, & Chung, 2010, p.4)
Contribution to economic growth (Liu, 2013) and job creation (Colecchia, Pattinson, & Atrostic, 1999)
E-commerce
New product distribution opportunities and cost saving potential (Wen, Chen, Hwang, 2001)
Time
Global B2C e-commerce sales
eMarketer, 2014

3. Master Thesis - Executive Summary
The importance of new ventures in e-commerce
3
Introduction
New venture in e-commerce
New venture whose core business is
e-commerce
Benefits of new ventures New venture
Firm, which is five years old or less (Chandler,
Honig, & Wiklund, 2005), and the end result of
the process of creating and organizing a new
business that develops, produces and markets
products or services in order to satisfy unmet
market needs for the purposes of profit and
growth (Gartner, 1985)
Important part of a healthy economy (Cooper, Willard, & Woo, 1986)
Driver of economic growth (Schumpeter, 1934)
Accelerate technological progress (Sorescu, Chandy, & Prabhu, 2003)
70%
30%
Failures of new ventures in e-commerce
Why do new ventures in
e-commerce fail?
Gulati, 2013

4. Master Thesis - Executive Summary
Problem definition
4
Introduction
Course of InvestigationExisting literature on failure of new ventures in e-commerce
Applicability to current context
No consistent definitions
Methodological flaws
Master thesis research questions
What are reasons why new ventures in e-commerce fail?
What are measures for reducing failure of new ventures in e-commerce?
1.
2.
Literature review1.
2.
Research gap
Qualitative inquiry
3. Discussion of findings
4. Conclusion

5. Master Thesis - Executive Summary
Methodological approach
5
Qualitative Inquiry
Research Design Sample Primary data - Interviews
Research purpose
Identifying failure causes of new ventures in e-commerce
Pointing out measures for reducing failure of new ventures in e-commerce
1.
2.
• Qualitative non-probability sampling
approach
• Seven venture capital firms
investing in e-commerce
• Qualitative approach
• Employing holistic multiple case
study design
• Inductive scientific approach
• Standardized open-ended interview
approach
• Conducted via telephone and email

6. Master Thesis - Executive Summary
Identified failure causes of new ventures in e-commerce
6
Internal
failure
causes
21
External
failure
causes
7
28
Finance Management
Marketing &
sales
Cash flow
challenges
Inappropriat
e business
model
Underfunding
Too high
costs
Unexperienced
management
Unskilled
management
Inappropriate
marketing
channel
6 7 7
Irresponsible
founders
Founders too
young
Inattentive to
KPIs
Product &
Inventory
Mgmt.
Poor sourcing &
logistics
1
High marketing
costs
Change in
consumer behavior
Poor product
market fit
High churn rate
Increasing
competition
Poor
infrastructure
Strong
regulationsInsufficient
margin
Wrong
estimation of
working
capital needs
Insufficient
economies of
scale
Poor
Management
Lack of
marketing
Lack of
affordable
marketing
channels
Too
optimistic
assumptions
of CAC &
CLV
Lack of
customer
retention
Lack of
customer
cohort analysis
Insufficient
sales
Bold = Primary failure cause
Qualitative Inquiry

7. Master Thesis - Executive Summary
Potential measures to reduce failure of new ventures in e-commerce
7
• Being KPI driven
• Better understanding of financial needs
• Conduct deeper market analysis
• Enter underserved markets
• Clearly define relevant product categories
• Vertical integration
• Building minimum viable product (MVP)
• Employ test cases
• Conduct scaling tests
Entrepreneur
• Conduct deeper market analysis
• Better understanding of financial needs
• Better due diligence
Investor
FAILURE
Qualitative Inquiry

8. Master Thesis - Executive Summary
Implemented measures of VCs to reduce failure of new ventures in
e-commerce
8
Regular reports
Realize synergies
Regular meetings
Verify product market
fit
Assessing availability
of financing
Reduce failure of new ventures in e-commerce
Evaluate opportunity
and team
Monthly update call
Verify test cases
Complement team
Evaluate CLV
Qualitative Inquiry

9. Master Thesis - Executive Summary
Failure Reduction
9
Discussion
Discussion & Implications
AssessmentAwareness Counter measures
1 2 3
Implications
Findings are mostly supported by new venture literature
Failure causes are partly related and interdependent
More internal than external failure causes
Pivotal role of raising substantial amount of money to avoid failure
Discussion

10. Master Thesis - Executive Summary
References
10
Chandler, G. N., Honig, B., & Wiklund, J. (2005). Antecedents, moderators, and performance consequences of
membership change in new venture teams. Journal of Business Venturing, 20(5), 705–725.
Colecchia, A., Pattinson, B., & Atrostic, B. (1999). Defining and measuring electronic commerce. In International
Statistical Institure Cutting Edge Conference on the Management of E-Commerce (pp. 1–15). Singapore.
Cooper, A. C., Willard, G. E., & Woo, C. Y. (1986). Strategies of high performing new and small firms: A reexamination of
the niche concept. Journal of Business Venturing, 1(3), 247–260.
eMarketer (2014). Global e-commerce sales to hit $1.5 trillion, driven by growth in emerging markets. Retrieved February
07, 2014, from http://www.retailcustomerexperience.com/articles/global-e-commerce-sales-to-hit-15-trillion-driven-by-
growth-in-emerging-markets/
Gartner, W. B. (1985). A conceptual framework for describing the phenomenon of new venture creation. The Academy of
Management Review, 10(4), 696–706.
Gulati, S. (2013). At least 70% of companies will fail in e-commerce: Vani Kola of kalaari capital. Retrieved February 05,
2014, from http://techcircle.vccircle.com/2013/08/21/at-least-70-of-companies-across-the- board-will-fail-in-e-
commerce-vani-kola-of-kalaari-capital/
Liu, S. (2013). An empirical study on e-commerce’s effects on economic growth.
In Proceedings of the 2013 Conference on Education Technology and Management Science (pp. 81–84). Paris,
France: Atlantis Press.
Schumpeter, J. A. (1934). The theory of economic development. Cambridge: Harvard University Press.
Sorescu, A. B., Chandy, R. K., & Prabhu, J. C. (2003). Sources and financial consequences of radical innovation: Insights
from pharmaceuticals. Journal of Marketing, 67(4), 82–102.
Turban, E., Lee, J., King, D., & Chung, H. M. (2010). Electronic commerce: A managerial perspective. New Jersey:
Prentice Hall.
Wen, H. J., Chen, H.-G., & Hwang, H.-G. (2001). E-commerce web site design: Strategies and models. Information
Management & Computer Security, 9(1), 5–12.