Why Startups Fail A New Roadmap for Entrepreneurial -- Thomas R Eisenmann -- Penguin Random House LLC, New York, 2021 -- Crown Currency -- isbn13 9780593137024 -- ca0bcba22cf184533f8c27417ae10a
The excerpt presents Thomas Eisenmann’s comprehensive investigation into why startups fail, drawing on a multiyear research program that combines case studies, founder and investor interviews, an MBA course, and a survey of 470 startups. Eisenmann defines entrepreneurial failure as the inability of early investors to recoup their capital and identifies six recurring failure patterns that span early‑stage (Good Idea, Bad Bedfellows; False Starts; False Positives) and late‑stage (Speed Trap; Help Wanted; Cascading Miracles). The book interweaves illustrative HBS cases (e.g., Triangulate, Quincy Apparel, Poppy, Baroo, Dot & Bo) with academic literature on founder traits (overconfidence, social competence, Big‑Five personality), industry experience, and network effects. It introduces practical frameworks – the Diamond‑and‑Square Business Model Analysis, the Six‑S scaling diagnostic, the Double‑Diamond design process, and metrics such as LTV/CAC – to help founders diagnose and avoid pitfalls. Chapters detail concrete operational challenges: hiring and co‑founder selection, customer discovery, MVP testing, premature scaling, financing risk, board governance, CEO succession, and exit strategies (acqui‑hire, sale, liquidation). The later sections explore the human costs of failure (emotional, cognitive, and physical tolls) and pathways to resilience, drawing on psychological research (prospect theory, escalation of commitment, narcissism) and real‑world anecdotes (founder burnout, post‑mortems). The work culminates in a “roadmap” that blends theory, empirical evidence, and actionable tools for entrepreneurs, investors, and educators.
Topics
Research Methodology & Definition of Failure
Eisenmann’s multiyear mixed‑methods research program—combining HBS case studies, founder and investor interviews, an MBA course, and a survey of 470 startups—and his operational definition of entrepreneurial failure as the inability of early investors to recoup their capital.
Six Recurring Startup Failure Patterns
A taxonomy of six failure archetypes identified across the venture lifecycle: early‑stage patterns (Good Idea, Bad Bedfellows; False Starts; False Positives) and late‑stage patterns (Speed Trap; Help Wanted; Cascading Miracles).
Founder Traits, Overconfidence & Psychological Dynamics of Failure
Synthesis of research on founder personality (Big‑Five traits, overconfidence, social competence, narcissism) and behavioral economics concepts (prospect theory, escalation of commitment) that shape decision‑making, risk perception, and the likelihood of venture collapse.
Scaling Challenges & the Six‑S Diagnostic
Adaptation of McKinsey’s 7‑S model into a Six‑S tool (Strategy, Structure, Systems, Scale, Speed, Sustainability) for diagnosing premature scaling, “Speed Trap” dynamics, and growth‑profitability trade‑offs.
Financing Risk, Capital Cycles & Bridge Funding
Exploration of venture‑capital boom‑bust cycles, valuation bubbles, bridge‑round strategies, and how financing timing influences startup survival.
Board Governance, CEO Succession & Organizational Systems
Best practices for board composition, governance priorities, CEO transition planning, and implementation of management systems such as OKRs to sustain scaling.
Exit Strategies & Post‑Failure Pathways
Analysis of exit options (acqui‑hire, strategic sale, liquidation) and the psychological aftermath for founders, including burnout, resilience building, and post‑mortem learning.
Roadmap & Practical Toolkit for Entrepreneurs
A consolidated, actionable playbook that weaves together all frameworks (Diamond‑and‑Square, Six‑S, Double‑Diamond), metrics (LTV/CAC), case insights, and step‑by‑step guidance to help founders diagnose risks and navigate toward sustainable growth.