Most unsuccessful startups out of Silicon Valley fail as a result of unpractical business models and a lack of funding, new research from a data marketing firm has revealed.
The data, published in a new article on Quartz, was collected by a pair of researchers from Fractl, who analysed blog posts written by the founders of failed startups from the early 2000s to today, who outlined what went wrong during their attempt to build the business.
During the project, which saw the researchers examine more than 190 blog entries, they found that over half of the founders (51) said the startup failed as a result of an unviable business model.
The second most common reason for a startup’s failure, cited in 46 of the blog posts analysed, was running out of cash, with other popular reasons including “not enough traction” and a “lack of financing/investors”.
In terms of industry categories, the researchers concluded that fashion companies experienced money problems most often, whether running out of cash or not being able to secure funding, with social media companies usually struggling to gain traction or unable to create a viable business model.
Software company founders largely put their startup failure down to focusing too much on technical features, and ignoring what their customers actually wanted from their product.
The researchers also noticed an interesting pattern between the difference in failure of startups who receive funding, and those who are bootstrapped.
Among the 147 funded startups analysed, the most common reason for their lack of success was running out of money (28%), while just four of 40 unfunded startups identified this a cause of failure, with the most popular reason for bootstrapped companies being a failed business model (25%).
To find out more about the research, read the full article here.