Startups in the U.S. fail at a rate of 90 percent largely due to cash flow problems and the lack of a market need for a product or service.
In fact, not even half of startups make it to their fourth year. It’s also noteworthy that 65 percent of startup owners admitted to not being fully confident about having enough money to even start their business.
At first glance, these statistics can be alarming for the young entrepreneur or anyone else who might want to start an enterprise from scratch.
Many Reasons for Failure
Contrary to popular belief, the high startup failure rate is a good thing. Choosing to create a startup company is risky, and a high percentage of them are supposed to fail. Startups are cutting-edge experiments; if startups were safe and reliable investments, they wouldn’t be doing their job.
Famous racecar driver Mario Andretti once said, “If everything seems under control, you’re not going fast enough.” Startups are high-risk, high reward moonshot opportunities that launch industries forward with bold ideas and aggressive thinking.
Startups also fail from poor planning, bad ideas, bad timing and other general difficulties that arise when trying to get a business off the ground. Furthermore, the people with the charisma to gamble their time and energy in a startup are typically young and inexperienced. While they have a lot of passion, they are more likely to lack the business skills and financial planning required to launch a successful business.
On top of this lack of necessary skills and tools, startups have a slimmer margin for error because they are so small in size. A few bad decisions can be absorbed by larger, more established companies, but one wrong move can tank a startup.
A startup is a single R&D experiment that will fail most of the time; larger companies have the resources to experiment and fail regularly and still be in business the next day. The implications of mistakes by startup companies reinforces how entrepreneurship is risky by nature. The rate at which entrepreneurs are willing to go to manufacture, package and sell untested products to a target audience renders inspiration from young people who are exploring their next business venture.
Risks and Work
Within the world of startups, some industries are much riskier than others. I work in the information business, which I call the sirens of the startup world. It looks very attractive from the outside so entrepreneurs rush in and wind up smashed on the rocks.
There is immense value in the information business, but it’s not as easy as it looks.. Entrepreneurs looking to enter this space rarely are prepared for the overwhelming tide of misinformation that occurs. This copious amount of misinformation must be handled in order to have a small amount of accurate data.
In the information business, young entrepreneurs often think they can make a fortune by organizing preexisting data for eager clients. However, the information business is constant work, and many startups aren’t prepared for its grind.
Being in the information business is like being a fisherman: You have to work every day to keep up with the changing information of the industry. Your product is maintaining a constantly moving landscape.
While it may be a perilous space for startups, the information industry can help more startups succeed. I do believe that a high percentage of startups should fail, but sometimes the wrong startups fail for the wrong reasons. It’s a shame when good businesses fail because of easily preventable obstacles, but this is where the information business can be of assistance.
The Right Information
In order to get off the ground, startups must target the messaging of their product or service to the right people. If their marketing and sales databases are inaccurate, they are wasting precious resources. Having accurate sales and marketing information is pivotal in the beginning of a business journey, when you’re trying to get your first 10 customers. When you’re trying to figure out your market fit, inaccurate information can cause you to make misinformed decisions on the outcome of your efforts on top of wasting time, energy and resources. This is a disaster for startups.
Many startups assume that the information they are starting with is accurate. This is can be a fatal error since organizations of all sizes rely on accurate marketing data to bring in customers. Up to 209 percent more revenue can be earned when marketers are aligned with their sales department — but, this may be an impossible undertaking for startups that don’t have a sales or marketing team to start with.
At the end of the day, the messaging of the product and the handling of contact data ought to be held to a high standard to generate the results desired. The fact that companies assume their data is accurate only underscores the importance of clean data. However, managing and cleaning date in-house has been a neglected function of even larger B2B companies. Without systems in place to stop dirty data in its tracks, it can spread like a wildfire.
No information is perfect, and all data has inaccuracies. It’s crucial for startups to begin with the most accurate information possible, but it is equally as important not to assume the information is perfect. The advice Ronald Reagan famously coined during his presidency is appropriate: One must always “trust but verify.” To trust means to have faith in the information, but to verify ensures there is a logical basis for that trust.
Fortunately for startups, they deal with much lower volumes of data. As long as they don’t assume the information is accurate and take extra steps to fix inaccuracies, bad data won’t be their downfall. At the same time, data accuracy holds higher importance because minor inaccuracies in a smaller set of data startups can result in bad conclusions.
Sales and marketing departments work with the same datasets and must understand the importance of having accurate information. The marketing department needs accurate information so it can run segmented campaigns with targeted messages. The sales department needs accurate information so it can know its customers and render them appropriate solutions.
Since they both work with the same data, they both have a role in maintaining it. If a startup plans to make data-driven decisions, and it should, its sales and marketing departments should set the bar high for maintaining accurate information. It can have a make-or-break impact on company.
On the bright side, new marketing technologies make it easier to take advantage of data and customize campaigns. Along with these new marketing technologies, data companies have more information than ever to help marketers personalize their campaigns.
As a rule of thumb, you should get only as personalized with your campaigns as your data accuracy allows. Segmenting different customer types is always good, but campaigns now can be personalized in ways they never could before. Having the correct contact information is a critical foundation, but attention also needs to be paid to other fields used for message personalization.
Sometimes it’s better to do more general marketing to ensure you’re not doing more harm than good with your personalization; some customers feel like their privacy is invaded with too much personalization.
If the data is accurate, personalization leads to much better customer experiences and more successful campaigns. Mail merging a first name into an email is a common practice, but it can be dangerous if your first name field isn’t clean. Now, imagine applying this targeting to more personal information like gender, age, favorite sports teams, hobbies, company size, years on the job, etc.
Steps for Startups to Achieve Success
1. Choose a Hot Market
Do research to learn which industries are growing, which have a future, and where potential consumers are spending their money.
2. Identify an Underserved Need Within the Market
Startups need to think outside the box in order to get their business off the ground. Products will succeed if they provide a service in a market that isn’t saturated (e.g. micro-blogging platforms).
3. Stake Your Claim
Formulate a workable plan to penetrate your desired market and acquire the data that will reach potential customers — namely, lists consisting of accurate company and contact information.
With all the risks involved, it’s easy to surmise that the startup landscape is not for the faint of heart. It is a dangerous endeavor where adventurers risk it all for a chance at fortune.
Don’t rush in with guns blazing — the increased risk means preparation is vital if you want to survive. The startup launching with clean sales and marketing data starts with an advantage.
Sky Cassidy is the CEO of
MountainTop Data and host of the If You Market podcast. He grew up in rural Northern California and moved to Los Angeles after college. After a decade in the sales and marketing trenches and dabbling in the Southern California startup scene he took over as CEO of MountainTop Data, a provider of list and data services for B2B marketing.
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