Why Early-Stage Software Startups Fail: A Behavioral Framework
This addresses the critical issue of failure for early-stage software startups, which is incremental as it builds on existing knowledge with a new framework.
The study tackled the problem of why early-stage software startups fail by investigating the inconsistency between managerial strategies and execution, resulting in a behavioral framework that highlights how prioritizing product development over problem/solution fit leads to failure.
Software startups are newly created companies with little operating history and oriented towards producing cutting-edge products. As their time and resources are extremely scarce, and one failed project can put them out of business, startups need effective practices to face with those unique challenges. However, only few scientific studies attempt to address characteristics of failure, especially during the early- stage. With this study we aim to raise our understanding of the failure of early-stage software startup companies. This state-of-practice investigation was performed using a literature review followed by a multiple-case study approach. The results present how inconsistency between managerial strategies and execution can lead to failure by means of a behavioral framework. Despite strategies reveal the first need to understand the problem/solution fit, actual executions prioritize the development of the product to launch on the market as quickly as possible to verify product/market fit, neglecting the necessary learning process.