Post Mortem on a Failed Startup

When you invest in startups, you see the good and the not so good.  Inevitably, you hear a lot of stories about why a particular startup failed.   Here is one startup CEO honest analysis of their company.  Hopefully, this will spur some conversation in the comments; and help current CEO’s decide where to put their energy-and priorities. (Feel free to use the Medium like highlighter too if you want)

It doesn’t matter what the name or industry this startup was targeting.  The more important thing to figure out is why they didn’t make it.

I think many of the things that they talk about in this are points I have written on in the past.  I will comment in italics.  I was not an investor but over the years I have spoken with the team.

Another point I want to stress.  Startups fail all the time.  It’s not a black mark on the founders.  As long as founders learn, the next time they attempt a company they should be better at avoiding the potholes.  If a startup ecosystem rejects or ostracizes founders for failure, then it’s not much of a startup ecosystem.

Sales / Marketing (we start with this because sales cures (almost) all problems):

  • We should have started sales earlier, from Day 1 or prior
    • This is a delicate tight-rope walk: Catch-22 of selling vaporware but also needing to identify product-market fit
  • Too much time spent on company marketing / positioning – “figuring out our identity” – without a true sales and marketing push
    • It does not matter if we call it a platform or system
    • It does not matter if we talk glowingly about user experience and “meaningful technology”
    • The only thing that matters is, “Is there a problem solved or need addressed that people will pay for?”
  • Not aggressive enough with sales, sales process not thought out
    • We needed someone on the team that had a sales background
    • Every startup underestimates this
    • I was not ruthless enough with sales, and didn’t create the sense of urgency necessary to win deals
  • I spent too much time spent trying to cultivate useless partnerships, vendor relationships, etc.
  • Too much time and money spent on marketing efforts, blog posts, and other collateral, without focusing on getting the product out the door and being on the phones
    • Focus should have been completely on sales
  • The more we spent time with prospects, the less we were convinced of a documented competitive advantage
    • Again, Catch-22: Only way to “get” that is through pilots, sales, etc.
  • Needed to be more aggressive in cold calling and prospecting
    • Shouldn’t have been afraid to do the hard stuff – cold calling and true sales

The best way to increase bottom line revenue is to increase top line revenue.  Technology is important, but knowing how to sell to your target market is critical for success.  Make sure someone on the team can sell.  If you are doing SaaS enterprise sales, it’s even tougher because that kind of sales is specialized.  Partnerships are nice, and relationships are nice.  But, neither improve bottom line revenue.  I find that when sales are outsourced, no one sells.

Hiring / Management:

  • We should have brought on an experienced CTO; missing a co-founder
    • Because we started off without a full-time, full-stack developer, the use of offsite contractors on a minimal number of hours resulted in communication lags around product vision and feedback from prospects
  • I was too inexperienced to be good manager and both delegate and communicate, especially to internal members of our team
    • There needed a clearer focus with assisting / contract staff

Having tech in house is key at an early stage.  It allows the team to communicate with the tech people and iterate faster. It also allows the tech people to communicate to the marketing people about product, product updates and what’s possible/not possible so they can communicate to customers.


  • We were too slow to launch
  • Should have had product in the market faster
    • Having a more full-time technical member of the team may have fixed this problem, but not for sure
    • Even with bad product, it’s a product, it’s being tested, obtaining user feedback, etc.
  • Co-founder’s perspective: “I am 100% convinced that we should have followed the ‘Wizard of Oz’ model for the product from the start of sales, where the product is demoed manually while looking like a fully-functioning product.”

Always launch fast and iterate like crazy.  Nothing will be perfect.  Nothing will look like the finished product.  Facebook 2016 doesn’t resemble the Facebook of  2010.  There is different functionality etc.  In Do More Faster, Brad Feld advocates launching as soon as you have anything functional up.  Customer feedback will drive iteration better, and more precisely than a group of engineers.  Launching allows you to create a hypothetical “market” or “network” rather than centralized bureaucracy making decisions.


  • “Design for the sake of design” isn’t a competitive advantage, workflow efficiency is
    • At the end of the day, Craigslist is still successful because it solves a real problem
  • For many individuals, they want to do their jobs and go home
  • We were in far too marginal of a niche – a “point product” trying to be something larger
    • This compounds the problem faced by administrators – as few early-stage ventures have a “full” product and few, if any, of the larger vendors are interoperable

Simplicity and elegance are design points that startups often fail on.  Make it super simple and almost intuitive.  Make the look clean.  If you are mobile, no more than one or two buttons to go through.  The simpler, the better.  Never over feature.  Make sure the purpose of  your company is incorporated into your design. in Chicago is a great example of that.


  • Remove emotions from business
    • Co-founder’s perspective: “In the process of deciding if we should continue and settle down and focus on sales; the biggest question I asked myself is if I actually believed in the business or not. If I didn’t feel passionate (emotion) about it, I wouldn’t have decided to stick to it completely. So I would probably say something more along the lines of remove emotion from certain parts of the business but not all.”
  • We were emotional during early-on fights over petty things (logos, titles, etc.)
  • Too emotional about losing our first major lead
  • Too much time spent on “hoping” things would happen
    • “Hope” is not a business strategy
  • Too much back-and-forth on some major hiring decisions
  • Once emotion was removed from the decision-marking process for me in early November, the entire process became that much clearer
  • Too slow to pivot / kill company; in-depth market focus wasn’t there
  • We failed to set objective metrics for fundraising, sales, product development
  • Due dates went and passed or were pushed back with no repercussions
  • We had an unwillingness to ship / release product, even though we could have had users test it much earlier
  • Too much time spent on irrelevant administrative details (incorporation docs, etc.)

It’s logical to want to remove emotion from a business.  It’s impossible though because we are humans-and humans thrive on emotion.  Fights can never be “winner take all”.  They also need to be done in a manner where they can be left behind when they are done.  Never, ever keep score.  


  • We should have “dated” more to get a better sense of intentions
  • A third founder possibly would have kept us more in check
  • We failed to pass the “beer test” – lack of team camaraderie – with few team activities, differing personalities, and different personal circumstances
    • This probably lead to demise more than anything else, largely my fault for not being more proactive / being introverted
    • Perspective from co-founder: “I am also not sold on the concept of the ‘beer test’; I actually don’t think founders need to have hardcore camaraderie to be successful. I actually think our differences were one of our strengths in a lot of decisions. We were living a frugal lifestyle.”
  • Relationship further deteriorated over time – “point of no return” sometime around late summer 20xx where differences in patience for traction, timeline for burnout, etc. diverged
  • I rushed into business way too quickly post college without more extensive management capabilities
  • Neither of us had worked with – or for – the large entities that we were going to be targeting for sales
    • This presented itself with a lack of understanding buyer behavior, internal politics, and idiosyncrasies in how these organizations work
  • We should have been more aggressive in using our advisory board for introductions, as opposed to just business model advice
  • Spent too much time on irrelevant events, community activities as opposed to being heads-down in sales and fundraising

Founder fit is more important than product market fit.  Having a triumvirate team found a company isn’t any better or worse than two people.  But, it has to be more than one.  Communication and emotional intelligence skills are key to successful founding teams. in Chicago teaches those soft skills.  Knowing how to lean on a board for support is a learned skill.  Often, founders think they appear weak if they ask for support.  

In startup ecosystems, there is always a lot of hype.  There are always a lot of events.  Many startup CEO’s are asked to participate and lead them.  At seed stage, it’s best to pass and let the accolades go to other people unless the event reaches your target market and you can be out selling your company to customers.  

“Fake it till you make it” isn’t a strategy.  Startups have mini-successes along the journey and they are to be celebrated.  But, the true success is a sustainable business with an exit.


  • Should have raised right at outset due to changes in our industry (largely a timing component that was out of our control)
  • Too much time on fundraising – too many attempts at fundraising
  • We had no “real traction” per se, and Chicago investors saw through this
    • One cannot, simply, “fake it until they make it”
  • If raising on coasts, raise more and sell “big audacious goals”
  • We never were going to get to product-market fit on the capital we had in the bank; we needed more runway
    • Like in sports, we didn’t really “lose,” it’s more we ran out of time

Money in the door makes a huge difference in the mental attitude of the team.  You can’t get money without traction, so if you don’t have traction don’t try and raise.  

Setting your “price” correctly is important too.  Structuring the deal correctly is important.  Know which investors you are pitching and sell to their hot buttons. You can’t build the company without money.  

Market Factors:

  • Customers with the largest contract opportunities will push back due to incumbent technology vendors carrying large amounts of clout, or other “full” products
  • For many companies in our space, a realistic exit is <$10 million; even at an optimistic exit ($30-40m)
  • The economics didn’t work in my favor to continue in full-time capacity, since we spent months on end living on subsistence conditions that distracted us from running the business

Most startups are conditioned to tell investors that they have a multi-billion dollar opportunity.  Anyone can cut the enchilada to show it has a billion dollar opportunity and every investor hears that at some point during the pitch.  The key to growth is scalability, and size of addressable market.  In this case, since most exits happen at less than $10M, the company was going to have a hard time attracting venture capital.  That calls for different tactics at an early stage.  The business still might be worth building without outside capital because it could provide a nice exit for the founders. 

  • Dan Kunze

    This eulogy is very interesting, thanks for posting it. In the sales section they definitely weren’t “selling the why”.

  • Seph

    Really interesting. Thank you for sharing.

    • I don’t think that you have to be lower than market. But, I think you have to have a good sense of the market. Ironically, knowing what the market is and getting the money in says a lot about the founders.

      • Seph

        I get your point about the importance of having a good sense of the market and how that comes first. Considering the opacity of the market, it’s a great signal when the founders can make sense of it all and make things happen.

        I think that the “lower than market” observation is trying to get at the fact that a good raise for the founder is more than a purely financial calculation of valuation/dilution – maximizing the one to minimize the other. Finding the right investor and giving on the valuation, in order to smooth the process, can ultimately deliver more value to the founder than less-diluted equity.

        The other good observation for a founder to consider giving on the valuation is to not get caught out when the step up to the next stage is taking longer than expected. (Re-seed, I’m looking at you.)

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  • Wow. great list. that’s going into the SUM library.
    curious what is that highlighter plugin you are using?

  • Radhika

    In my experience I have noticed technical product companies focus more on getting the shape of the product before marketing and by then they are way behind in the market. On the other hand social media is time consuming. My 2 cents start by viral marketing , in a few rounds you can assess your gap, product and idea

    • If you are a B2B company, there is little reason for you to use social media; especially early.

    • pschott

      One does not simply “market virally” 🙂

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  • Sales is obviously critical in B2B tech startups. The challenge is that founders are not in sales nor come from sales backgrounds. The extent of their “business” experience is either an MBA (where sales is hardly addressed) or working for a big company. Therefore you have a situation where founders need to sell, but are incapable of selling successfully.

    I read the above and cringe somewhat. Things like cold calling sound great in theory, but even good companies screw this up and ultimately waste more time and resources than it is worth. Time and resource are not luxuries when it comes to early stage startups. Sales is also about focus and precision, which makes it doubly hard for founders, who are also involved in five other high priority tasks.

    Some founders figure it out through trial and error. More often than not, they were able to parlay connections in their network to close those first few customers. They can be successful early because they have the “founder passion” and it is usually that enthusiasm that can bring in those early deals. It is the gap between those few first customers and a repeatable sales process where most founders fail on the sales front.

    There is a guy Peter Kazanjy ( that has some good insights into founder sales that I recommend. I also started this community called the Enterprise Sales Meetup to help connect B2B sales professionals together. A ton of founders join us as well and often have found their first sales hire through the group or closed a big deal based on the advice they heard. I am planning on launching a Chicago community in March, glad to share that with you once the details are sorted out.

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