Why Startups Fail Book Summary - Why Startups Fail Book explained in key points
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Why Startups Fail summary

Tom Eisenmann

A New Roadmap for Entrepreneurial Success

4.4 (234 ratings)
24 mins

Brief summary

Why Startups Fail by Tom Eisenmann is a comprehensive guide to the common mistakes that lead to failure in early-stage startups. Using case studies and analysis, Eisenmann provides insights into how to avoid these pitfalls and increase the chances of success.

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    Why Startups Fail
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    To evaluate the health of your startup, you need a reliable framework.

    Professor Tom Eisenmann of Harvard Business School is an expert on startups. But after over 20 years of research, he had a huge wake-up call. Looking at two ventures founded by former students of his – one of which he’d had so much faith in that he’d even become an investor – he couldn’t pinpoint why they’d both failed. It completely unnerved him.

    So he started analyzing why startups fail, looking beyond typical excuses like blaming the economy. This research led him to create a framework that identifies four crucial opportunities every startup has. To achieve success, a startup needs to capitalize on these opportunities and ensure they’re working together. You can use this framework to check the health of your own venture and course-correct where necessary.

    The key message here is: To evaluate the health of your startup, you need a reliable framework.

    The opportunities that Eisenmann identified are your startup’s resources, which work together to create, build, manage, and sell a product or service in a profitable way.

    The first is your brilliant idea. As founder, you’ll have come up with a unique solution that meets a specific customer need. It will effectively solve an important problem that customers face – and be different from anything else on the market.

    The second is technology and operations. These are the systems you need to build your product, deliver it to customers, and maintain products after sale. This will include the ways you manage inventory and shipping, as well as sales and booking platforms your customers use.

    Third is your profit formula. This projects the revenue you’ll earn through sales, as well as the cost of earning that revenue – including your operational costs. A solid profit formula helps you confidently manage your cash flow.

    Finally, there’s marketing – how you’ll communicate with potential customers and entice them to buy your product. Hopefully your marketing strategies will be so effective that your customers will become loyal brand ambassadors, so you can rely on them for repeat sales.

    These four opportunities are supported by the people involved in your startup – you and your cofounders, your hardworking team, the investors providing you with venture capital, and any partners offering guidance or expertise. If your opportunities are a racehorse, collectively these people are the jockey. To win the race, they need to complement both each other and the startup as a whole.

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    What is Why Startups Fail about?

    Why Startups Fail (2021) identifies six core reasons why startups fail. It presents a framework for analyzing startup failure that explores how different aspects of a business work together. Entrepreneurs can use this framework to evaluate the health of their own ventures. 

    Who should read Why Startups Fail?

    • Founders of early-stage startups
    • Entrepreneurs looking to scale their companies successfully
    • Innovators who’ve failed to get their project off the ground

    About the Author

    Tom Eisenmann is Professor of Business Administration at Harvard Business School, where he teaches entrepreneurship. He has coauthored 130 case studies that are used in business schools across the globe. Eisenmann has invested in dozens of new ventures, has served on many startup advisory boards, and has coached thousands of students who want to become entrepreneurs.

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