They have not failed, they have just found ways that won't work; A study of factors that influence the failure process of startups
Jong, E.M. de
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Startups contribute to economic development and are important initiators of innovation. The literature that identifies factors which stimulate the development of startups, is fragmented and controversial. In addition, the absence of sufficient studies into factors leading to startup failure is of particular concern. This is remarkable, considering the high failure rate of startups. To contribute to the understanding of startup failure, this thesis studies failure factors and its influence on the failure process of startups located in The Netherlands. In order to study this, an integrative framework with failure factors is established based on literature, which addressed the fragmentation and the controversial literature. A database that of the Dutch Chamber of Commerce that includes factors that explain cessation was used to search for failure factors beyond the factors included in the integrative framework. No additional factors were found, but some of the factors in the framework were confirmed by the database. The main research consisted of 21 interviews with founders which resulted in insights in the frequency of failure factors, what can trigger failure factors and how failure factors can lead to failure of startups. This brought more understanding to the failure process. To provide additional information and context to these results, five startup experts have been interviewed. The 25 failure factors that have resulted from this study, have been clustered into the categories product, market, financial resources, strategy, founder(s)/team, culture in sector and external influences. Different failure factors contributed to different extents to the failure process. Failure factors in the category founder(s)/team occurred most and had the strongest impact on the failure process. On average the failure process was influenced by seven failure factors, the factors varied per case. The factors are interwoven and influence each other. Patterns and causality among factors are diverse and most factors are not bound to a certain phase of development of the startup. The high number of factors contributing per case and the diversity of these factors, results in a high variety of sets of factors contributing to failure, which shows the high amount of paths to failure. This shows the high complexity of the failure process of startups.