Premature scaling - the main cause of death of startups?

The company Startup Genome has published an application to the May analytical report on start-ups . Now, information has already been collected on 3200+ companies and the main reason why startups are falling apart is considered in detail.

After examining the experience of thousands of startups, Startup Genome concludes: 70% of failures are due to premature scaling.

In short, what is meant.

Startup Genome specialists consider a startup as a kind of 5D-organism. During growth, he should develop five independent directions in harmony:

• users
• product
• team
• finance
• business model

At each of the six stages of development of a startup before becoming a big company, a different ratio of these five areas is considered harmonious. Premature scaling is too fast or too slow development in one or several directions. The art of managing a startup is precisely to manage to develop all of them equally and harmoniously, otherwise collapse occurs.

• Users
  1. Too high costs of attracting users before the market has matured and developed a sustainable scalable business model.
  2. Excessive compensation of unpreparedness of the market by efforts on marketing and the press.
• Product
  1. Product creation (product as a solution to a problem) in the absence of a suitable problem.
  2. Investing in product scaling to market maturity.
  3. Adding "cool" features.
• Team
  1. Premature hiring too many employees.
  2. Hiring specialists before they become a critical need: financial director, customer service staff, database specialists, etc.
  3. Hiring managers (VP, product managers, etc.) instead of employees.
  4. Having more than one level of hierarchy.
• Finance
  1. Attracting too small investments to overcome the "valley of death."
  2. Attracting too much investment. Although this is not necessarily bad, it almost always deprives entrepreneurs of discipline and gives them the opportunity to scale up prematurely in other areas, for example, by over-developing a product or hiring extra personnel. Too much investment is also a greater risk for investors who would rather allocate limited amounts as needed.
• Business model
  1. Too much effort to make profit too early.
  2. Excessive planning, action on the plan without the necessary feedback.
  3. The lack of adaptation of the business model to the changing market.
  4. Inability to comply with the business model, with the result that when scaling costs can not be kept at a lesser amount than revenues.

In the report (distributed free of charge) you can examine each item in more detail, see the statistics on start-ups and comparative graphs (harmonious / inharmonious).