why start-ups fail

Without doubt the attrition rate for start-ups is very high.
And the riskier the project the more likely it is to fail.

The graph below is some of the best data I have come across.It is taken from Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By Scott Shane. The data comes from a special tabulation by the Bureau of the Census produced for the Office of Advocacy of the U.S. Small Business Administration.
While these data look at the 1992 cohort of new single-establishment businesses, the failure rate percentages are almost identical for all the cohorts that researchers have looked at. So, these are pretty much the one through ten year survival rates of new firms
Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of eight books, including Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By; Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures; Technology Strategy for Managers and Entrepreneurs; and From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Company.

Doing a start-up is all about the management of risk. risk such as technology risk, market/customer risk etc. According to stephen Blank, a silicon valley serial entrepreneur, most start-ups fail because of market/customer risk.

the old model of doing a start-up of raising finance, building the product and then launching is particularily susceptible to failure because insufficient effort is spent on identifying/ developing the customer and establishing the market that is addressable for your product.

in the following three videos Stephen Blank goes through these issues and outlines a process for managing this type of risk. Guy Kawasaki said it best when he said that if he finds a project where (in marketing speak) the dogs are already eating the dogfood ie you can demonstrate traction in the marketplace then he is a happy man.

These videos are from the Eric Ries Startup2Starup event posted on youtube