Why Startups Fail – Can Early Media Exposure Kill Your Startup?

by Ariel Steinlauf, Managing Partner at Onyx Venture Advisors

Oct. 15, 2013

Today, more than ever before, the barriers to starting a new company are the lowest they’ve ever been. This phenomenon is not necessarily reserved to companies in the online/mobile space, but it applies to tech startups in a more profound way. Hardware has moved to the cloud and is offered in a utility model, and open source software stacks are now available to anyone who would care to seek them out and learn how to integrate them. These two elements combine to create a materially easier environment in which to create new online/mobile products and services.

And so, the question should be asked: if starting a company is so easy, why do startups fail?

When you ask entrepreneurs, founders of fledgling startups, what their companies’ needs are, almost invariably the 3 answers you’ll get would be – funding, customer acquisition, or business development. Those are indeed highly important to any business, but there is a bigger issue that is often ignored but should be dealt with before any effort is made to get more funds or acquire more customers – is your startup ready?

Recently, two entrepreneurs – Brett Martin of Sonar and Bobby Ghoshal of Flud – have published fascinating post-mortems about the reasons behind their respective startups’ failure. In their posts, which are highly recommended reads to any aspiring entrepreneur, a common thread is revealed. Both startups secured funding, got millions of users, and garnered substantial media attention. On the flip side, both startups were not ready for the media’s attention, and the ensuing public interest, and continuously failed to deliver a glitch-free, uber-positive customer experience. That, coupled with constantly worrying about their competition, and spending too much time on potential enterprise partners’ whims, resulted in both startups reaching the end of their runway without a coherent product that caters to customers’ needs.

Steve Blank once commented on early media exposure:

Isn't it cool if you start your company, and the first thing you do, TechCrunch mentions you? … I gotta tell you, if I'm on your advisory board or board, I'd break your arms… For me, any type of press, any type of PR, any type of talking about your company, is not done [before you have discovered your customer]… that's typically done after you've understood what business you're in, who your customers are, and how you need to scale demand for your company."

No other “words of wisdom” I know capture this more accurately. The chief goal of an early stage startup is to figure out what its business is. That is achieved by customer development efforts, such as talking to your customers, understanding what pain points they experience, and focusing on providing a solution to their pain. As part of that process, entrepreneurs should develop an early sense of how they intend to make money out of their new product. This should not be left as an afterthought.

Too many entrepreneurs have been mesmerized by the media too early and failed to focus on these two critical tasks, leading to their startups’ demise. Don’t be one of them. There is a time and place for media exposure, but it should be done when your startup is ready to reap its benefits.