You’d think startups fail because of bad luck or something no one saw coming.
Luck matters, yes. It just gets blamed for too much while the ordinary reasons companies fail are sitting there in plain sight.
That’s the argument Bernie Bulkin makes in his new book Why Start-Ups Fail, which I’ve been reading this month.
When you’re in the thick of it, with tech, staff, product, and constant questions all going wrong at once, you do not always see it clearly. Some distance changes that. 👇🏻
Failure gets dressed up
Failure gets talked about as courage, bad timing, or the cost of trying something ambitious. Founders get to sound brave and investors get to shrug off dead companies as the cost of backing the future.
Bulkin is critical of the venture model here. A fund does not need a portfolio full of strong, well-run businesses. It needs one or two huge outcomes big enough to pay for a long list of write-offs.
That leaves founders in a different game from the people backing them. You are trying to build something that survives. A fund built around home runs can ignore a perfectly good business if the upside is not big enough. If it goes wrong, you are the one left living with the consequences.
He also shows how easily this gets cleaned up after the fact. Bad decisions start sounding like ambition. Failure starts sounding like proof you were serious, when often it was just bad judgement with better PR around it.
Where the boring damage starts
One of the easiest mistakes to miss is the gap between proving something can work and building a business around it.
Something works in a lab, a prototype gets built, a demo lands, and people act like the hard part is over. It usually is not. Science proves something can work. Engineering turns it into something repeatable, reliable, affordable, and scalable.
Building one impressive thing is not the same as building a system that can produce ten thousand of them properly.
The same thing happens in the market. Founders love a big TAM, but the harder question is how the market actually works. A giant market means very little if you do not know who actually buys, how they buy, who sits in the middle, and what it takes to get them ready to buy.
Enterprise sales are no different. Founders love talking as if they are going to sell straight into Shell, Ford, or another giant incumbent. In practice, a lot of those industries buy through procurement chains, tiered suppliers, and middlemen. The buyer is often a lot less glamorous than the logo on the pitch deck.
Then they burn months in meetings and pilots while nobody buys. A big market does not help much if your company cannot actually reach the buyer.
The money usually goes wrong earlier
After 21 years in venture capital, Bulkin knows running out of money is usually not the whole story.
By the time the money runs out, the real damage has usually been building for a while. The company was underfunded, or the founder kept cutting the wrong things and calling it discipline.
A lot of founders tell themselves they are being disciplined when they raise too little to avoid dilution. Then they spend the next year stuck in fundraising mode, preserving a larger share of a weaker company while starving the thing they were supposed to be building.
Work that looks non-essential gets pushed back until you realise it was holding the structure up. IP protection gets delayed. Market work gets skipped. Nobody gets a proper grip on the numbers early enough. The company starts penny-pinching and ends up broken underneath.
He makes the same point with cash timing. Founders model salaries and rent, then act surprised when inventory timing wrecks them. Paying suppliers long before customers pay you is part of how the business works. If you do not understand that gap early, growth can make the company weaker, not stronger.
Valuations create another version of the same problem. High paper valuations can narrow the ways out, inflate expectations, and turn sensible outcomes into disappointments for the wrong people on the cap table. That kind of valuation can make the business much harder to save later.
Then the founder becomes the problem
This is the bit that can sting. The founder who is right in year one is often wrong by year three. What gets a company off the ground often starts causing problems later.
Bulkin’s founder types are easy to recognise. The technical founder who never really becomes someone who can run the business. The fundraiser who is stronger in pitch rooms than inside the company. The arrogant one who cannot hear challenge.
Once the company gets bigger, those weaknesses stop being quirks and start doing damage. Startups still give too much credit to confidence, visibility, and a good story long after the business needs something else.
It’s easier to keep telling a story about a bold founder changing the world than to admit the company needed someone different to lead it and never got that.
Most startups die because the boring bits were not taken seriously enough. The ones that stay alive usually take them seriously early. They understand how the business actually works, from engineering to buyers to cash, and they know when the founder has to change with the company.
Bernie Bulkin also gets into how founders can stay out of some of these lethal traps. I’m turning that into a separate Millennial Masters feature. In the meantime, you can get Why Start-Ups Fail here.
The key is basically to sell. "We're all simply burning time" but we're all talking about burning money. The old phrase Get Big or Get Niche or Get Out holds mostly true. If you can't Get Big (the asymmetric return) or Get Niche (hyper efficient & growing) then Sell or Merge. I frequently see two players making the market smaller by fighting hard against each other - the TAM get smaller (as prices come down) and sub divides again and again. Join forces. Or simply sell out and burn your time elsewhere. Your 3 years to a $3m disappointing exit with everyone pissed off could be the training rails for a 8 year $500m exit in your next gig. "We're all simply burning time"
This is a great list. The last one resonates with me in particular. I've been in the company where the founder lacks the leadership and EQ skills needed to retain top talent and the company slowly loses their key players. It was painful. I wouldn't be who I am without that experience, though.
My dream is kestryledge.com can serve these companies and arm the teams and leaders with the tools needed to succeed.