Internet and high-tech startups are failing for the same reasons for 25 years

06 February 2017

While doing research and interviewing founders, co-founders and investors in Internet, high-tech and non-high tech start-ups and scale-ups for my new book in Dutch (see here) on start-ups and scale-ups, I realized that there were a lot of similarities between the first and the second Internet-bubble we seem to be experiencing now. One of the most interesting things is that start-ups and scale-ups seem to be ‘crashing’ for the same reasons for the last 25 years! From 1997 to 2001, I was working for ABN Amro Corporate IT Strategy and we were designing the new Internet-strategy for the Group. At the same time, all requests for funding (corporate venturing) and financing of Internet and other high tech ventures came to the Head Office to be reviewed. So we spoke with many large and small customers globally about their business plans and strategies.

We rejected most of the proposals because they were not good enough.
1) There was too much emphasis on ‘getting financing and funding’ instead of on the founder, the teams, the business models and the idea, on the real innovation.
2) The start-up scene was to a large extend dominated by large corporates including the large consultancy and accountancy companies. I personally did not understand how people that had never started a successful company in their lives could advice others and judge if a startup or scaleup would be a success or not.
3) Another mistake was that many start-ups used the same models and focused on ‘filling in the forms’ (like with the ‘Business Model canvas’ and ‘Lean Start-up’ instead of focusing on ‘the WHY, the WHO and the HOW’ to really be innovative and be different from the rest).
4) Most founders were trying to imitate other successful companies instead of thinking about the real problems customers and people in general might have. And I saw the same thing during my Fintech-course at M.I.T. last year.
5) Too much emphasis on technology instead of on the people (founders, teams, partners and customers).

The result is that 99% of the start-ups and scale-ups inside and outside Fintech, Insurtech and RegTech are still not successful and all of that because of mistakes made in the first part of the life-cycle of the company ‘from idea to successful startup’.

Is everything the same?

So is everything the same now? No, it is not. It is even much easier to found your own start-up in Internet and high tech than it was before. Software is cheaper, bandwidth is cheaper and storage much cheaper. And that is also where the danger is: it is just too easy. And that is also the case because there is again a lot of funding from Governments and from corporate and private investors available for basically bad ideas with the wrong people. On the other hand, real entrepreneurs with the right soft skills and hard skills in their different teams and with the right idea and the right partners can still become very successful under the condition that their timing is right and that they solve real problems for real paying customers!

Tony de Bree

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