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Autopsy of a Dead Startup: 5 Key Learnings From a Failed Business

In 2017 we had our first zero at Blossom Street Ventures. I’ll withhold the name of the company, but I do want to share key learnings from that failed business. Below is an autopsy of a dead company.

Build a Product for One Market

Our portfolio company built phenomenal technology but the company didn’t actually productize. While the technology had many use cases and applications, we failed to apply it to a single product or market.

As a result, we weren’t recognized in any field, we weren’t thought-leaders, and the sales team never focused on one niche where it could become an expert selling a solution. We were dumb generalists selling a technology with no domain expertise or industry focus.

Lesson learned: Build a real product, focus on one market, and don’t move to a new market until you’ve successfully established your company in that original market.

Failed Business Learnings

Watch Your Sales Cycle

Although we signed contracts with big names like Facebook and Yahoo, these contracts were always custom. These personalized projects not only had a long sales cycle, but they also used a lot of team resources. As a result, our deals weren’t profitable enough given the money we spent closing and servicing our customers.

Revisiting the point above, we should have built a product around the technology, not a product around specific and distinct customers. If the product wasn’t a fit, no problem, we could have moved on and focused on our real prospects we could sell to profitably.

Lesson learned: Don’t build your product around specific and distinct customer-use cases.

Cash Is King

We did not grow fast enough given the cash burn. Period.

If you’re going to burn cash, make sure you’re growing fast enough. Grow fast enough that you can easily justify raising a new round at a new valuation with 6 months of cash left. If the revenue to burn ratio is too high and growth rate too low, you’ll end up with a down round. If you’re unlucky, you’ll die.

Lesson learned: Your cash burn should inform your growth.

Know Your Limitations

A big issue we faced was the CEO naming himself the head of sales. With the CEO spread thin, we never developed strong sales leadership. Therefore, the company never had the benefit of a real sales professional building out a team of AE’s, watching the sales cycle, monitoring metrics like ACV and up-sells, etc.

At the early stages of any business, the founder will do most of the selling, but professionalize this function as soon as you can afford it by bringing on real sales talent.

Lesson learned: Hire talent to complement and build out your team.

Know When It’s Time to Exit

Ironically enough, we had three opportunities to exit this ultimately failed business.

In one case, we would have actually made money and the other two cases, we would have recouped about 80 cents on the dollar. In hindsight, these would have been fantastic outcomes rather than zeroing out, but the time these potential exits were viewed as disappointing and were met with no support.

Each time we should have seen the exit through: investors could get some money back, the VC could focus on other companies in their portfolio, and the founders could start fresh. Knowing when it’s time to walk away is valuable.

Lesson learned: Seriously consider all exit opportunities.

Failed Business Mistakes are Avoidable

While not uncommon, many of the pitfalls of failed companies are completely avoidable. If you’re curious to learn more, see a list of all top failed businesses in 2018 and in 2017.


Sammy is a co-founder of Blossom Street Ventures. They invest in companies with run rate revenue of $2mm+ and year over year growth of 50%+. We can commit in 3 weeks and our check is $1mm. Email Sammy directly at sammy@blossomstreetventures.com.