Why Startups Fail audiobook cover - A New Roadmap for Entrepreneurial Success

Why Startups Fail

A New Roadmap for Entrepreneurial Success

Tom Eisenmann

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Entrepreneurship

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Why Startups Fail
The Evaluation Framework+
Pitfall 1: Lack of Industry Knowledge+
Pitfall 2: The False Start+
Pitfall 3: The False Positive+
Pitfall 4: The Speed Trap+
Pitfall 5: Wrong Senior Management+
Pitfall 6: Overly Ambitious Visions+
Bouncing Back: The Three Rs+
Leadership & Continuous Improvement+

Quiz — Test Your Understanding

Question 1 of 9
According to Tom Eisenmann's framework, if a startup's four crucial opportunities (idea, operations, profit formula, marketing) represent a racehorse, what do the people involved (founders, team, investors) represent?
  • A. The racetrack
  • B. The trainers
  • C. The jockey
  • D. The bettors
Question 2 of 9
Why did the clothing startup Quincy Apparel ultimately fail despite having a great idea, solid marketing, and a viable profit formula?
  • A. The founders lacked specialized industry knowledge in garment manufacturing.
  • B. The founders were unable to secure enough venture capital to scale.
  • C. The founders scaled too quickly into European markets.
  • D. The founders built an MVP before conducting any market research.
Question 3 of 9
In the context of startup failures, what is a 'false start' as demonstrated by Sunil Nagaraj's dating software company, Triangulate?
  • A. Misinterpreting early sales from a niche market as mainstream demand.
  • B. Hiring generalist senior managers instead of industry specialists during early growth.
  • C. Expanding into international markets before domestic operations are profitable.
  • D. Investing time and money into building a product before confirming consumer interest and market need.
Question 4 of 9
What critical mistake led to the downfall of the pet-care startup Baroo?
  • A. The founder failed to hire an executive coach to manage team relationships.
  • B. The founder fell for a 'false positive' by assuming exceptional early success represented mainstream market demand.
  • C. The company chose an inadequate Enterprise Resource Planning (ERP) system that lost track of pets.
  • D. The company's vision was too ambitious and relied on unproven consumer technology.
Question 5 of 9
To avoid the 'speed trap' of scaling too quickly, Eisenmann recommends using the RAWI test. What does RAWI stand for?
  • A. Research, Analyze, Wait, Implement
  • B. Revenue, Audience, Workforce, Infrastructure
  • C. Ready, Able, Willing, Impelled
  • D. Risk, Action, Wealth, Innovation
Question 6 of 9
What key lesson regarding senior management can be learned from the failure of the e-commerce company Dot & Bo?
  • A. Startups should prioritize hiring generalists with impressive, broad CVs over specialists.
  • B. Founders should manage operations themselves rather than delegating to Vice Presidents.
  • C. Startups should avoid hiring senior management until the company reaches $50 million in revenue.
  • D. Startups should hire specialists with specific sector experience to manage scaling operations.
Question 7 of 9
How can founders of highly ambitious, high-risk ventures (like Shai Agassi's electric car company, Better Place) mitigate their risk of failure?
  • A. By inflating market demand projections to secure maximum venture capital early on.
  • B. By using nonfunctioning prototypes to gather focus group feedback and moderating innovation to keep customers in their comfort zones.
  • C. By launching fully functional products immediately instead of wasting time on prototypes.
  • D. By forcing radical behavioral changes on the consumer to disrupt the market quickly.
Question 8 of 9
According to the text, what are the 'Three Rs' that help founders successfully navigate the aftermath of a failed startup?
  • A. Regret, Repay, Relaunch
  • B. Research, Restructure, Refinance
  • C. Recovery, Reflection, Reentry
  • D. Resilience, Rebranding, Revenue
Question 9 of 9
Why does the author recommend that startup founders hire an executive coach?
  • A. To help founders build awareness about their workplace practices and avoid tunnel vision that damages team relationships.
  • B. To outsource the daily operational management of the startup so the founder can focus on pitching to investors.
  • C. To replace the need for specialized senior management during the early stages of growth.
  • D. To guarantee that the startup will secure its next round of venture capital funding.

Why Startups Fail — Full Chapter Overview

Why Startups Fail Summary & Overview

Why Startups Fail (2021) identifies six core reasons why startups fail. It presents a framework for analyzing startup failure that explores how different aspects of a business work together. Entrepreneurs can use this framework to evaluate the health of their own ventures. 

Who Should Listen to Why Startups Fail?

  • Founders of early-stage startups
  • Entrepreneurs looking to scale their companies successfully
  • Innovators who’ve failed to get their project off the ground

About the Author: Tom Eisenmann

Tom Eisenmann is Professor of Business Administration at Harvard Business School, where he teaches entrepreneurship. He has coauthored 130 case studies that are used in business schools across the globe. Eisenmann has invested in dozens of new ventures, has served on many startup advisory boards, and has coached thousands of students who want to become entrepreneurs.

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