Why 9 Out of 10 Software Startups Fail

The startup world is competitive and leaves little room for error, but you can make it to IPO with an emphasis on important data and utilizing all the tools at your disposal.

software-startup

Within their first five years of operation, 9 out of 10 startups fail. This truth doesn’t reflect startups’ lack of ingenuity and hard work, but rather an inability to nail down fundamental practices. As the co-founder of Nutanix and DevRev, I’ve spent over a decade successfully bringing startups to their IPO. That time has taught me what the 10 percent of successful startups do, and I plan to share those insights here. So, here’s why 9 out of 10 startups fail.

Velocity and Growth Engineering

The first key characteristic of a successful startup is velocity. Speed of building, rapid iteration, and continuous discovery are at the heart of velocity. One extremely effective way startups can achieve velocity is through continuous discovery. Unlike linear discovery, which emphasizes outputs, continuous discovery focuses on outcomes. Through researching user data and the implementation of hypothesis testing, startups can unlock key insights into product-market fit, product outcomes, and overall customer experience. This is dependent upon growth engineering, as growth engineers use technical, marketing, and data analysis skills to improve a startup’s retention. Overall, continuous discovery and growth engineering allow product teams to stay ahead of the curve, create true value for customers, and learn how customers think.

Convergence

Convergence is another key principle that all startups should instill into their company’s DNA. When startups achieve convergence, team members adopt a common terminology, discover the same data/insights, and the SOR of product features is connected to the customer’s and coworkers’ priorities. The use of common lingo and effective communication can streamline a team’s projects and diminish the possibility of miscommunication. Once communication is improved and team members can think in a hivemind-like manner, the data and insights collected by different employees begin to sync. Moreover, connecting front and back office teams enables company goals to be understood and reached at a faster pace. 

Product-Led Support

Harking back on the idea of continuous discovery, understanding a customer’s needs is at the crux of proper customer support. Startups should focus on product-led support, a proactive, in-app approach where a company’s app detects issues within the product, pushes out a solution and then notifies its customers proactively because the product is typically “aware” of the customer context and usage. Most of the actions in this model are code-driven, and the work related to customers in the back office is connected to the product features and prioritized based on user identity.

Companies like Uber, Lyft, and Tesla already use this approach and in doing so, avoid the outdated process of customers detecting issues on their own, contacting a support line, and opening a support ticket to get it resolved. Not only does this old method skyrocket company costs, but it also provides a poor customer experience as well. Product-led support will be a driving pillar to the successful startups of the future, and an inability to convert will be a deciding factor in the crash and burn of promising companies. 

Stretching the Dollar and Interns

Stretching the dollar is one of the more obvious focal points of any startup. But what is the easiest way to do so? Building a community is one potential route. Using resources to rally a community, a marketplace, and students helps startups avoid building a silo and instead leverage a plethora of resources from those willing to contribute.

Connectors-Connectors-Connectors

Not all of the services of a successful startup are built in-house. This would be too costly and take away from the critical time needed to focus on building out a company’s main product or service. With this in mind, the use of community-built connectors can prove to cut costs and simplify complex processes. Webhooks and APIs are the core means of building connectors that can link multiple applications to one another and allow startups to use third-party applications effectively. Specifically, webhooks and APIs allow one app to send automated messages and information to another app. This is how PayPal tells your accounting app when your clients pay you. In the long run, using connectors can give back time and money to focus on growth engineering and product development.

Conclusion

Velocity, convergence, and growth engineering are the top priorities for startups of today. But nailing product-led support, stretching out the dollar, and using connectors will push their success into the future. The startup world is competitive and leaves little room for error. But with an emphasis on important data and utilizing all the tools at your disposal, your startup just might make it to IPO.

Dheeraj Padney

Dheeraj Pandey is the CEO & Co-Founder of DevRev, a fully-remote tech company working to bring developers and customers closer together. He co-founded the company in 2020 to connect developers and customers through a system of record, social experience, and machine learning. He currently serves as a board member at Adobe and is a member of the board of advisors at the University of Texas at Austin Department of Computer Science. Pandey has over 20+ years of experience in the software industry, including time with Oracle. He holds a B.S. in Computer Science from the Indian Institute of Technology, Kanpur, and an MS in Computer Science from UT Austin.


Dheeraj Padney

Dheeraj Pandey is the CEO & Co-Founder of DevRev, a fully-remote tech company working to bring developers and customers closer together. He co-founded the company in 2020 to connect developers and customers through a system of record, social experience, and machine learning. He currently serves as a board member at Adobe and is a member of the board of advisors at the University of Texas at Austin Department of Computer Science. Pandey has over 20+ years of experience in the software industry, including time with Oracle. He holds a B.S. in Computer Science from the Indian Institute of Technology, Kanpur, and an MS in Computer Science from UT Austin.