Capital and Liquidity

Startups live and die by whether they have enough money in the bank. In this part of Why Startups Fail, you’ll earn about a different kind of product-market fit: when you are the product and investors are the market; and when your company is the product and larger companies interested in buying yours are the market.

Whether you’re looking for an angel round of funding, or raising tens or hundreds of millions, how you pitch can have just as big an impact as what you’re pitching. In Chapter 10 we’ll explore the motivations that drive investors: greed and fear. I’ll talk about the key reasons so many pitches fail—and how to avoid them. You’ll come away equipped with the ability to frame properly and connect with your audience. And you’ll understand that all-to-obscure entity, the investment partnership, and how to put it to work for you.

Having built their companies for years, far too many entrepreneurs leave money on the table when it comes time for a “liquidity event”—selling or merging the business. They get outmaneuvered by experienced investors or corporate development teams. In Chapter 11, you’ll learn how to get paid for your work. Many potential merger and acquisition transactions (which account for some 90 percent of liquidity events) that seem promising at the outset end up failing. You’ll learn the common reasons why and how to avoid them—starting with planning long before your company approaches a liquidity event.

In Chapter 12, we’ll see how focus combined with failing fast leads to success. I’ll cover some of the rewards and tradeoffs involved in doing a startup—including the myth of working for yourself. It has been said that success has many parents while failure has few. I’ll conclude with a summary of the key reasons for startup failure and how you can learn from them to make your startup a success.