By James Santagata
Principal Consultant, SiliconEdge


I came across this interesting Silicon Valley Business Journal article entitled "Why do startups fail? Here are the top 20 reasons" which summarizes a large post-mortem analysis of startup failures conducted by CB Insights

One quick takeaway to highlight:

"After reading through every single of the 101 post-mortems, we’ve learned two things. One — there is rarely one reason for a single startup's failure. And two — across all these failures, the reasons are very diverse."

Here's the top twenty reasons:
(Note: percentages don't add up to 100 because sometimes there are multiple reasons for failure)

1. Building a solution in search of a problem: Falling in love with an idea or building it out with market validation. 42 percent cited this. 

2. Cash Out. No Mas: We'll assume this wasn't due to financial mismanagement or malfeasance but a natural outcome of a sane burn rate over an extended period with trailing revenues of a lean nature. 29 percent reported this.

3. Wrong team: Lacking key members or skill sets This was cited by 23 percent of the companies. 

4. Beaten by the competition: About 19 percent of the companies reported this.

5. Pricing/cost issues: Reported by 18 percent in the study.

6. Poor product: This was reported by 17 percent of the companies.

7. Need/lack business model: A lack of a viable model killed 17 percent of these companies.

8. Poor marketing: Knowing how to code or build good products isn't enough. Reported by 14 percent of the companies.

9. Ignoring customers: 14 percent of the companies in the studied pointed to this.

10. Mis-timed product (releases): 13 percent of the companies in the survey reported this. A Calxeda employee told CB Insights, “We moved faster than our customers could move. We moved with tech that wasn't really ready for them... We were too early.”

11. Lost focus: 13 percent reported this.

12. Founder/investor strife: Creative tension is far different than toxic infighting. 13 percent of the companies succumbed to this.

13. Pivot gone bad: As has been said, "The pivot used to be called the f****up".  10 percent pointed to this.

14: Lack passion: The passion to stick it out, to execute. 9 percent identified this as the reason.

15: Bad location: For hiring/retaining talent, customers, investors and so on. This was cited by 9 percent.

16. No financing/investor interest: This was pointed to by 8 percent.

17. Legal challenges: Cited by 8 percent of the companies.

18. Don't use network/advisers: Again cited by 8 percent of the companies.

19. Burnout: Never a good thing, many reasons why a team can burn out. 8 percent pointed to this as the culprit.

20: Failure to pivot: As has been said earlier, "The pivot used to be called the F****up" and while that may be true it doesn't change the fact that continuing down the same messed up path is going to get your any place faster (other than bankruptcy court) and certainly no where better. 7 percent cited this.

By James Santagata
Principal Consultant, SiliconEdge


That Japan like any country, be it developing or developed, has her share of problems is not in the least bit surprising or at least it shouldn't be.

However, what has surprised me over the years is how many foreign "Japan watchers" and "Japan pundits" always seem to miss the crux of what's really going on on the ground in Japan and more importantly what's going on in the mind of the Japanese.

When articles are written or comments made about the supposed dearth of Japanese startups, the author or speaker almost always boils this down to several factors such as Japan's Shima-guni mentality (Island Nation / 島国), the so-called Galapagos Effect (which as I've continually pointed out is really just a misnomer for an industry or marketplace rife with ossified, rent-seeking incumbents and regulatory capture), Japan's supposed lack of talent, Japan's supposed lack of diversity and Japan supposed lack of creativity.

In the past, I've written about and either fully debunked these myths and memes or I've put them into a context in which they are far better understood.

With that said,  there is another popular myth and meme that comes up regarding the lack of Japanese startups and that is the idea that the Japanese have an almost in-born fear of failure.

I'm not here to argue that Japanese don't have a fear of failure because they do. We all do. Just as most other peoples around the world do, including those in the US and even including those working in Silicon Valley.

People fear failure. 

But to hear the pundits tell it, "Japanese need to get over failure and embrace it". These pundits act like the fear of failure in Japan is simple a psychological construct* like it is in parts of the West like in the US.

(*For the record, even in the US failure is more than just a psychological construct, there are still real financial, social and psychological penalties, set backs and damage that can and do come with it. But this is so much less than what is faced in Japan)

Now I am here to tell you, that in Japan this "fear of failure" is not simply psychological but real. Depending on the failure level there are material penalties that can accrue or hit one hard and if you are to strike out on your own or with a small group of friends, launch a company and it fails it is not like Silicon Valley where you can walk down the street and pickup a paycheck at a top firm while your lick your wounds, get on your feet and start again or even just resume your pre-startup career.

In Japan, the damage and risks include and span the following:

• Career risks
  
• Social risks (personal and romantic relationships and prospects; access/membership to business clubs, etc.)
  
• Psychological risks (depression, self-hate, loathing)
  
• Financial risks (immediate and long term)
  

There are huge differences in how societies views failures and how you move on in terms of romantic prospects and relationships, platonic relationships and friendships, how your family views you, the support groups you have and, most importantly, the career risks which translate, in the end,  to money - to financial issues.

Although much has changed in Japan over the last 8 years, especially in the last 4 years or so, it is still no where near the levels of what we see in the West regarding some issues such as Mid-career hires.

Now let's step back in time, to say 1995. In the US, for instance, much of the economy was still coming out a bad recession from a couple years earlier where housing prices were pummeled - in fact, I remember many saying they wouldn't buy a home again.

As one specific example, I'll pick Silicon Valley as just one example, even in that economy, a person could have a massive failure and if they learned something and could present themselves well, they could easily land a similar or even better job by leveraging it. Even if they were fired.

Conversely, even if they didn't learn anything, they still could land a similar job. Even if they were fired.

People hired with a very open mind based on what the candidate could produce.

In Japan, the idea of mid-career hires, although changing now, was really non-existent unless you had super skills, super connections or worked at a foreign firm (gaishikei), like Microsoft, Oracle, etc. who needed talent and hired among themselves.

I can tell you, as just one example, when I met with Fuji-Xerox HR group back in mid-2008 to discuss their domestic hiring needs, although they were very polite and professional, it was made extremely clear they wanted new grads only and that they weren't set up to recruit mid-career hires.

Did that mean that mid-career hires didn't happen at Fuji-Xerox?

Of course not. 

But it did mean and it does mean that mid-career hires (a)  were rare and (b) a special case.

Which again leads to this risk factor of damage to one's career and so on.

Coupled with this was a employee/candidate ethos that often considered working for a direct competitor "dishonorable" while on the company side, such a candidate applying for a position from a direct competitor would be seen as "suspect" or "suspicious". 

Again, I want to emphasize this has been changing for the better over the last 8 years and specifically the last 4 years or so but this hiring mentality exists and so does the economic and career damage fear among workers.

I can also share with you some examples where I took top talent from various gaishikei firms (in this case, in the network & information security industry) and introduced the persons to other top companies, both domestic and gaishikei.

Often what I heard was, "They are a job hopper".

My thought: "Are you insane" or "What an idiot, can you not see how talented this person is to fill the position you've had open for the last 4 months...."

My reply, "Uh, no. They aren't a job hopper. And regarding their changes, the last company they worked for went bankrupt and the other two companies before that, that the candidate worked for got acquired by huge multinationals. They left because they preferred a smaller work environment."

The reply?

"Well, that shows bad choices on their part."

A bad choice? To know the firm would go bankrupt? To work at a startup or a company working in emerging markets or developing nascent technologies?

This actual conversation took place in 2008. And I've had numerous conversations like this, from the mid 1990's, skipping through the dot com boom of 1999 to 2001 (in the US, the dot com bomb died out with the 2000 Nasdaq crash but Japan trailed about a year) to around early 2009. Then it thawed a bit. 

I should note that in the dot com bomb, Japanese firms were so scared by the hype and activity happening online that they did hire mid-hires and they did bring in foreigners, even non-Japanese speaking. Fear of the firm failure, spurned positive changes. In other words, competition is good.

I should also add that this was within the fast moving, dynamic tech industry. I've also done work in very static sectors like industrial chemicals, and as late as 2008, it was not uncommon to have a HR manager or even the hiring authority (even the country manager) characterize a person who had stayed at each job less than 5 to 10 years was seen as a job hopper and also undesirable.

Wrapping this up, it's not so much that Japanese have a greater fear of failure than, say, Americans, it is simply that the economic cost of a failure in Japan is much higher - financially, socially, psychologically.

Once you understand, all the pieces begin to fall into place.