To Succeed As A Startup, Businesses Must Pivot Often and Never Give Up

Can you guess how many startups fail?  I can almost guarantee you it's more than you think.  More than 50%?  Easily.  75%?  Yep, more than that.  85%?   

Try 90%.  Yes, 90% of startups fail.

This is an astounding amount of failure, and begs further scrutiny.  Why do so many businesses fail, and what can we learn from them?  Is there a way to better establish failure-proofing in a new business?  And is it even worth considering launching a startup?

Let's dive in, talk about a few key elements that every startup needs to be concerned about, and look at two examples, SpaceX and Peer, where companies in cutting edge industries succeeded, but not without some intense challenges.

Budgets and Product/Market Mismatch:  The Deadly Duo of Business Danger

When starting a new business, whether you are self-funded, crowdsourced, or carried by a venture capital firm, the budget is just about the biggest component of your success or failure.  Whether businesses have a good or bad product, whether they have a good read on the market, and whether or not there is competition present, if a company runs out of cash, they are done.  They might end up over a billion dollars in debt before they start to turn a profit (like Airbnb and Uber), but as long as they have cash flow, they have a chance at success.  Because of this, businesses need to tightly control their costs, understand the path to developing the right product, and have the means to market and produce the product for sale.  Even companies who are VC darlings and have nearly unlimited funds have to be strategic with their budget.  There are risks in having too much money as well, as it allows for inefficiencies, focusing on too many product features for the market, or simply adapting a massive cash flow that will eventually dry up.  Businesses have to understand their roadmap that will get them to revenue, understand the revenue it will take to cover costs and start making a profit, and plan for those unexpected events that could cut away much of the budget, very quickly.

Assuming the budget is under control, startups are always at risk of misreading the market.  This could involve making a product nobody is willing to pay for, assuming market demand that doesn't actually exist, or building a good product and marketing it to the wrong people.  In fact, 42% of startups crash and burn because of some combination of product/market factors.  A founding team must allocate a budget to conduct the in-depth research needed to verify market demand. 

Two Success Stories

Unfortunately, just because you have good budget discipline, have verified market demand, and have a competitive stance, doesn't guarantee success.  You still need to design a product or service that actually works, and that can solve your customers' problems.  There is still a lot that can go wrong, which brings up the secret ingredient to success.  In addition to managing your money, working to match product and market, and understanding the competitive landscape, you need to have unyielding tenacity.  In other words, you must be willing to never give up...but also to keep adjusting, pivoting, and trying new things.  Two key examples come to mind.  One, a startup that 15 years ago was nearly unknown, and another that is making a name for itself in the Augmented Reality Web3 space.  

SpaceX is today known for amazing feats of engineering and rocket-based gymnastics.  They've accomplished routine reusable rocket landings that don't even make the news anymore, yet were considered by most global rocket scientists to be impossible just a decade ago.  This rise to prominence has been so fast, and so steep, that it is mind boggling to think that they were one launch failure away from going under.  The company's first rocket, the Falcon 1, had all the promise of today's big dreams:  reusable, ten times cheaper than anyone else, and able to be manufactured incredibly fast.  The only problem?  Every time they tried to launch it, the rocket exploded.   As Musk would state 9 years later in an interview, they were one launch failure away from bankruptcy.   However, after three failures, that last attempt was successful, and the rest is history.  In between each failure, however, was a mountain of redesign, deep analysis, and troubleshooting.  This rapid iterative development was by design, and is how true innovation happens.

Cutting to the very recent future, a Web3 startup called Peer experienced a similar round of frustrations, pivots, and dead ends before it ultimately found success.  In 2021, founder Tony Tran had a vision to enable crypto mass adoption.  This would happen, he thought, through the use of Web3-driven AR (augmented reality), creating a Metaverse that could be built by a global community, and driven through the borderless benefits of crypto.  This was incredibly bold but also dangerous, given that both the metaverse and Web3 platforms were especially prone to failure (as quick look at the company formerly known as Facebook could show).  However, Tran also saw that the reason for this failure was a lack of the technology needed to support it, so 110 patents later and the platform was nearly ready to launch.  However, like SpaceX, it suffered setback after setback during development.  While nothing literally blew up, the team kept trying to find the right platform to build on without success.  The platform's blockchain was originally developed on Ethereum, which was ultimately too limiting. Then it was developed on Diem, which had little community support and too many issues. The team tried to define and develop a custom DAG framework in C++, but this too flopped. They finally settled on a custom Nominated Proof of Stake implementation based on Polkadot's framework, which gave the scalability, stability, and speed they needed.  

Lessons Learned

While the failures for both SpaceX and Peer were incredibly costly, they also resulted in much superior products.  The key lessons from both companies are important for all startups.  Namely, you have to be in complete control of your budget, exercising more discipline than you think you need.  There will be speed bumps, and you need time, budget, and a lot of bravery to cut losses quickly, pivot, and push ahead.  Along with this you need to fully understand your market and the product they want, otherwise your pivots might be in the wrong direction.  If you can accomplish these, you might just succeed where 90% could not.  Good luck!