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Four Reasons That 95 Percent of Startups Fail … Plus One From the Audience

During his appearance at Qualcomm Inc., internet pioneer and Google executive Vint Cerf asserted that 95 percent of startups fail. Better business practices could get that down to 65 percent, he said.

Cerf made his comments during the one public session of a three-day gathering called Cerf’s Up in San Diego. The public session at the end of June was hosted by the MIT Enterprise Forum.

Asked later to elaborate on the reasons 95 percent of startups fail, Cerf ticked off four in quick succession:

• We ran out of money,

• I didn’t manage the company well,

• I misjudged the market and

• I priced myself out of the market.

There is a discipline to running a business, Cerf said. “I think a number of these folks are so focused on building a product that they don’t think about a market they satisfy. Also, a market can shift out from under you. If you don’t recognize that in time, your company might fail.

“If I have a choice of a CEO that had a failure before, and a CEO that hasn’t, I’m going to pick the one that had a failure before, generally speaking, because he’ll recognize the symptoms sooner than the other.”

An audience member suggested a fifth reason companies fail: employees are not engaged. “Twenty to 30 percent where people are just basically clocking it.”

“The Gallup polls show exactly that,” said Cerf, who has worked as a senior adviser to the Gallup organization for 15 years. “… Jim Clifton, who is the CEO of the company, has reported repeatedly that disengagement is very common. The real problem there, I think, is that unless you create an environment where people feel empowered, then you’re going to get this disengagement.

“At Google … and I say this only because I’m there and so I have more familiarity with it, you are really empowered to do stuff — including fail. Including trying things out that might not work. And there are a lot of companies where that’s just not considered acceptable.”

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