2 VCs on why startups actually die

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After analyzing startup postmortem stories, CB Insights recently revealed the top 20 reasons why startups fail. The topmost reason is that founders realized there is no market need for their product/service. This is followed by funding problems and team problems, respectively.

We reached out to VCs to get their take on this and to share some insights from their extensive experience working with startups.

Editor’s note: Answers have been edited for clarity.

Nikhil Kapur, principal at Gree Ventures

Caveat: I think the research is highly theoretical. And based on my own experience working with a handful of startups, I doubt you can call it statistics.

The usual reason why startups fail is simple: team. The founders are either not the right team to execute on the problem/solution or could not hire the right people to add to their strengths.

Markets, problems, business models, and almost everything usually changes from what the startup set out to do/solve on day one. It’s rare to see the startup crack the problem on the first day, let alone the solution. The only thing that stays put is the right team that can execute well together and has the courage plus passion to stick through the rough patches.

Failure to solve a real problem

It doesn’t matter whether there is an initial market need or not. The entrepreneur’s role is to build based on what he/she feels should be built to solve a problem, and then test the MVP. If it works, double down. If it doesn’t, pivot. It sounds simple, but you’ll be surprised by how many people get stuck on their own ideas, fall in love, and become unwilling to iterate.

If there’s no market need and the startup shuts down, that’s a team problem, not a market problem. Successful founders have a different DNA, and they’ll succeed regardless. The only other thing that plays a huge role in a startup’s success/failure is luck.

Let’s discuss