Andy from get help talks about some really good reasons why web startups fail. I would agree on all of them. I have been involved in a couple of companies that committed almost every single sin on his list. They weren‘t web startups but wanted to act as such because they believed the hype.

I personally think that the worst and most common reason is his #2 “Believing the Hype“. Andy is right about the hype. The internet is all about and nothing but the hype. We all know that myspace is nothing more than a phpnuke like website. That skype wasn‘t worth 6 billion dollars and fotolog is the simplest web app ever sold for 100+ mil?. But because they did that well we all want to repeat that wild success and (#9) copy it.

10 nonexistent revenue stream

Your only revenue stream (or exit strategy) cannot be that one to be bought out by google, microsoft or yahoo. I really hope that you will get bought out someday but somebody is going to fork a lot of money before that might happen. Fotolog doesn‘t run on a $6.99 plan @ godaddy, you need a bit more than that for 10 million users. 10 million users means lots of servers, lots of storage space and lots of bandwidth. It all costs money. Why would anybody buy you if there is no way to monetize your business.

9 Lack of differentiation

Be either the first mover in the market space, or be very distinctive. Don‘t be another me too.Think hard about what makes you different and work from there.

8 poor to horrible management

Inability to say no or shelter the development team from company‘s problems.

7 not enough resources

A team of 2 or 3 is enough to develop 1 site efficiently. It‘s not enough to design, develop, market and sell 3 sites at the same time, something gotta give.

6 Lack of self assessment skills

Many times I have seen people ignoring reality. I have seen both Managers and CEO‘s not understanding neither what they were requesting their team to do, nor the team skill‘s level. Too many times people just think they can build a better Ebay with 1 or 2 half ass programmer.

5 Lack of market research

“The problem with ebay/amazon/google is“ or “The reason why people don‘t use ebay/amazon/google” are phrases that I heard from upper management that don‘t use any of those services or have not done any research in regard but they were in charge of the market strategy and product development. Personal opinions are not fact do your homework.

4 Lack of self criticism

Not every idea that you‘ll have is golden nugget. Know when to quit. which brings to

3 Lack of focus

You don‘t need to pursue all of your ideas. Your application doesn‘t need to appeal to everybody from 5 to 99 year old. Your application doesn‘t need to have all the bells and whistles of all other competitors‘ product combined to be considered finished.

2 Unrealistic deadlines

Boss: We need to launch it by the end of the week.
Manager: Ok out of these 20 features which one should we prioritize
Boss: all of them

1 Unrealistic goals

We are going to reach 1 million paid users by the end of the month
If each of our users will invite 2 new users every day by the end of the month we will ….
There are 800 million people in china if we just get 20% of that in the next 2 months and they‘d pay us 2 dollars a month we‘d be set at that point somebody will have to buy us (see #10).
If you cannot see the absurdity in the above statement your people will and it will drive them crazy that you don‘t. They‘re effort will be geared towards bitching and not towards results mainly because they are not achievable.

It all goes back to believing the hype with no research. Fotolog didn‘t happen in a couple of months and neither did myspace, facebook, ebay or amazon. It all seems like an overnight success but they were all years in the making. People try to jump start success but it can‘t be really done. It seems that nobody wants to do the leg work and that‘s why everybody has the same exit strategy, to be bought out.

If your business doesn‘t have an exit strategy but has a revenue stream instead you are already in a better position then 90% of the startups out there.