Read the full transcript of investor and business strategist Misti Cain’s talk titled “The 2 Reasons All Startups Fail”, at TEDxSanDiego, May 2, 2025.
Listen to the audio version here:
Introduction
MISTI CAIN: As a kid, about eight or nine years old, one of my favorite games to play was business. Yes, that’s what it was called. And I’d make one of my brothers play business with me. Now, I don’t know what we did or sold. I just remember we made a lot of money. As one does at eight years old with absolutely zero experience.
I clock hours on this plastic toy phone, having really important meetings. And my absolute favorite part of playing business was doing this when my brother tried to talk to me.
Well, thankfully, I went from playing business to actually learning business. As a digital marketing strategist, I gained a deep appreciation for quantitative data. And as a founder turned strategy consultant, I gained a deep appreciation, well, for telling other people what to do. Now, as an investor, not only do I occasionally get to tell people what to do, I get to give them a little bit of money to go and do it.
Working with and mentoring hundreds and hundreds of entrepreneurs and executives has given me a really unique advantage. I get to see behind the scenes of both some of the most successful startups, but also startups that didn’t make it.
The Two Reasons All Startups Fail
As it turns out, despite all the hindsight reasons that a startup may give, there are only two reasons why all startups fail. Number one, falling in love with solutions and not problems. And number two, not moving fast enough.
I know what you’re doing right now. You’re trying to think of other reasons. You’re like, “Misty, wait a second. What if their co-founder left or they couldn’t get funding or there was a recession or a pandemic?” And yeah, these things impact a startup success, but like a medical diagnosis, they’re just symptoms. If you put any other reason into one of those decision flow charts, the underlying diseases that kill all startups are still either focusing on solutions versus problems and or lack of speed.
Falling in Love with Solutions: The Stuart Butterfield Story
Now, I learn best with examples, so let me share a couple to show you what I mean. And one of the best examples that I can think of of falling in love with a solution is Stuart Butterfield.
So in 2002, Stuart Butterfield built this game called Game Never Ending. Well, contrary to its name, in 2004, after failing to get any meaningful traction, Game Never Ending comes to an end. But Butterfield saw lots of engagement with the game’s photo upload and share feature.
See, the problem at that time, this is the early 2000s. Wow, I sound like a grandparent right now. Back in my day, the problem was people lacked a way to store and share photos easily. So when Game Never Ending flopped, the team built out that photo upload and share feature. Well, the solution for that specific problem became Flickr. And in less than one year, Yahoo purchased Flickr for over $20 million.
But Butterfield was in love with building a game that was a solution. So he tried again with a new game called Glitch. These names, I tell you, they seem to foreshadow the outcomes, don’t they? Okay. Well, Glitch was designed to allow gamers to collaborate and build a digital world together over time.
But while building Glitch, Butterfield and his team encountered a problem, and it’s a problem that’s actually pretty common to a lot of startup teams, which is efficient communication. And since the majority of the team were engineers, they decided they’d just build an internal communication tool to solve their own problem.
Well, when Glitch failed, the team had this light bulb moment, and they thought, maybe other teams have this efficient communication problem. So they shared an early version of this internal communication tool they built with friends and colleagues. Then in 2013, they launched this internal communication tool, and they asked people to “imagine all your team’s communication in one place, instantly searchable and available wherever you go.” That’s Slack. And when Slack was acquired in 2020, it was valued at over $27 billion.
Focus on the Problem, Not the Solution
Focus on the problem, not the solution. Innovation is simply the creative ability to solve problems. And maybe you’re thinking, well, what’s the difference? Isn’t coming up with a solution the same thing as solving a problem? Actually, no.
Diane Halpern, who’s a professor of psychology at the Minerva Schools at KGI, says that problem solving is the cognitive use of skills or strategies that increase the probability of a desirable outcome. Okay, in layman’s terms. Learn as much as you can in order to make an informed decision. Then test your hypothesis and settle on the best possible result.
Starting with solutions actually limits you. Think of it like continuing to buy tissues because your nose is running when the actual problem is you’re allergic to the sesame seeds on your morning bagel.
The Importance of Speed
Okay, focus on the problem. Got it. But that’s just half the reason all startups fail. The other is speed.
A few years ago, I got the chance to mentor a founder who I ended up just calling Captain. And the reason why I called him Captain was because he tested the waters and shipped like it was his full-time job. In the startup world, to ship just means to make a product or feature available to actual users.
Brian was the CEO of this startup that helps developers and their teams gain insights into and share the value of their open source projects. Well, the thing I immediately learned about him and now use as a litmus for all other founders is that Brian moves fast.
So we’d be in a meeting and I’d ask Brian to consider something.