MGMT8015 Chap.3 Why Startups Fail: Six Patterns
Why Startups Fail: Six Patterns
Beyond horses and jockeys
Investors often blame either the idea or the founders.
Thomas Eisenmann calls that an oversimplification and identifies recurring patterns instead, split between the early stage and the later, scaling stage.
The early-stage patterns
Good ideas still fail with weak or misaligned partners, when products are built before customers are understood, or when early enthusiasm is mistaken for proof of demand.
Prevention
Defining the problem, developing several concepts and validating them in real settings guards against false starts, while waiting for repeatable behaviour guards against false positives.
Cases the lecture uses
A clothing start-up shows the bad-bedfellows pattern: inexperienced co-founders, inflexible staff, weak manufacturing partners and investors pushing for growth too early.
An online dating venture shows the false start: it launched on assumptions, pivoted three times in under two years and lost $750,000 of funding.
What this chapter covers
- 01
Horses, jockeys and why both explanations are too simple
- 02
Good idea, bad bedfellows
- 03
False starts and their causes
- 04
False positives and early traction
- 05
Speed traps, help wanted and cascading miracles
- 06
Three steps that prevent false starts
- 07
Using the patterns to stress-test a business model
Worked example · free
Diagnose a fitness app that scaled too soon
- 1The venture is early-stage: the model has not yet been proved.
- 1The download spike came from enthusiasts reached by one post, not from the mainstream market.
- 2Weekly activity of 140 out of 2,000 is 7%, so the behaviour is not repeatable.
- 2Scaling on that spike is a false positive; repeat use should have been confirmed before hiring and expanding.
Key terms
- False Start
- A failure pattern in which founders build and launch a product before they understand what customers need.
- False Positive
- A failure pattern in which early enthusiasm, often from early adopters, is mistaken for proof of mainstream demand.
- Cascading Miracles
- A late-stage failure pattern in which success depends on several separate dependencies all going right.
- Speed Trap
- A late-stage failure pattern in which a venture’s growth outpaces the capabilities it has built.
Why Startups Fail: Six Patterns FAQ
Why do most start-ups fail according to the course?
The course rejects the simple answer that founders or ideas are to blame. Following Eisenmann, it identifies six recurring patterns, three early and three late, such as misaligned partners, skipping customer discovery, misreading early traction, growth outpacing capabilities, missing skills and plans that depend on several miracles.
What is the difference between a false start and a false positive?
A false start happens before launch: the team builds without first understanding customers. A false positive happens after launch: strong early reactions, usually from innovators and early adopters, are treated as proof and the venture scales too early. One skips discovery; the other misreads evidence.
How can a founder avoid a false start?
The lecture gives three steps in order. Define the problem through customer interviews and competitor analysis, develop several solution concepts rather than one, and validate them with minimum viable products in real-world settings. The causes it warns against include a bias for just building it and pressure to keep developers busy.
What do venture capitalists mean by horses and jockeys?
The horse is the start-up and its idea; the jockey is the founding team. When a venture fails, investors tend to blame one or the other. Eisenmann argues that this oversimplifies a complex situation, and his six patterns explain failures that neither a weak idea nor a weak team alone can account for.
Which failure patterns happen once a venture is growing?
Three late-stage patterns: speed traps, where growth outpaces the capabilities the venture has built; help wanted, where essential skills or hires are missing; and cascading miracles, where the plan depends on several separate things going right at once. The lecture spends most of its time on the earlier patterns.
Exam move
Draw a line split into early and late stages and place the six patterns on it from memory. Then take your own venture idea and write one sentence on the pattern it is most exposed to and the evidence that would show you were avoiding it. Then reread the Week 11 debrief on student venture pitches and match each criticism to the pattern it most resembles.
Learn the stage of each pattern, because single-answer options often hinge on it.
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