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Why do so many startups fail?


Whilst studying at Harvard Business School, Alistair Shepherd was inspired to try and understand why so many startups fail. He believes he may have found the answer.

“I was studying at Harvard Business School and was really interested by the research of Noam Wasserman,” explains the founder of Saberr, Alistair Shepherd, whose social analytics enterprise software looks at relationships within teams.

Wasserman’s ‘The Founders Dilemma’ analyzed 212 American startups and came to the conclusion that 83% of venture backed startups fail outright.

Of those, 65% were due to team dynamics.

Inspired, Shepherd wanted to find out more about team dynamics and how they worked, believing at the end of his journey lay the answer to the ultimate question.

“What makes a company successful?”

Getting to that answer required a lot of work and a stroke of genius. Shepherd asked himself:

“How could we use new data sources to predict this and anticipate it [failure], and therefore engineer better outcomes?”

Online dating would be the source of the data that would propel him towards his end goal.

“I wanted to find a data source that would help me predict the quality of relationships between people. Online dating to me seemed the obvious place to start. It’s essentially a digital record of two people’s attempt to find a good relationship. So we took this element, and applied it to some of the more consistent theories from academic behavior research.”

“I was already familiar with classic psychology and personality profiling. Tests like Myers Briggs, Hogan and Belbin. But the thing is, you can’t predict the success of a company based on a personality test”

Employing some help from the world of online dating, as well as some knowledge around traditional psychometric tests, Shepherd set out to predict the future of businesses.

Claiming an astounding 95% rate of accuracy, it appears the answer to the startup success ultimately comes down to team dynamics.

“Successful companies are built upon really solid relationships between the employees of these companies.”